The Republic of Ireland returned to the debt markets with a bang on October 16th when its €6 billion bond was heavily over-subscribed. This was the first time it accessed the debt markets since it raised $500 million in 2005, and is the first new government bond line in over three years.
Demand topped €16 billion for the bond, with interest coming from 150 investors across Europe. The October 2018 notes, paying 4.5 per cent interest, were priced to yield 15 basis points more than benchmark German bonds. Eleven per cent of the bonds were sold in Ireland, while the UK and Germany/Austria accounted for 21% each.
Strong economic conditions over the past few years meant that the government didn’t have any borrowing needs, which led one of the main primary dealers, AIB, to withdraw from the market. However, according to the NTMA, as the Government maintains its capital investment programme over the coming years and as revenue growth moderates due to the slower rate of economic growth there will be deficits to be funded. Moreover, the agency, which is Ireland’s asset and liability management body, has two forthcoming bond redemptions of €6 billion in October 2007 and €5 billion in 2009.
These redemptions together with expected small deficits on the Government budget mean that there will be a regular schedule of bond issuance over the coming years.
Barclays Capital, Davy, Deutsche Bank and HSBC were mandated as joint-lead managers for the transaction. Despite the return of Ireland to the debt markets AIB has confirmed to FINANCE that it will not be re-establishing its primary dealer unit.
The nine primary dealers in Irish government bonds are: ABN AMRO; Barclays Capital; Citigroup Global Markets Limited; Calyon Corporate and Investment Bank; Davy; Deutsche Bank; HSBC; The Royal Bank of Scotland; ING Bank NV. |
