Irish to sell debt for 1st time in nearly 2 years

Ireland to dip toe in bond market for 1st time in nearly 2 years with sale of 3-month bills

Associated Press
Irish sell T-bills for 1st time since 2010 bailout
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In this Sunday, July 1, 2012 photo pedestrians pass a beggar on the Ha'penny Bridge in Dublin, Ireland. Unemployment in the Republic of Ireland has risen to 14.7 percent over the past four years of fiscal crisis, during which Ireland has spent tens of billions nationalizing its debt-crippled banks and risked national bankruptcy itself. Ireland's treasury plans this week to hold its first sale of debt securities since the country's 2010 EU-IMF bailout and hopes to resume normal borrowing next year. (AP Photo/Shawn Pogatchnik)

DUBLIN (AP) -- Bailed-out Ireland is to auction debt this week for the first time in nearly two years, treasury officials said Tuesday, in a test they hope will ease the nation's return to normal borrowing next year.

Treasury chief executive John Corrigan said Thursday's planned sale of €500 million ($630 million) in three-month bills "marks an important first step in our phased re-entry to the capital markets."

The widely expected move follows recent strong buying of Irish bonds in the secondary market — where earlier issued bonds are traded openly — in response to last week's European Union agreement on managing debts in the 17-country eurozone.

The yield, or interest rate, on Ireland's 10-year bonds fell below 6.25 percent Tuesday for the first time since October 2010, and yields on shorter-term issues fell even further to nearly 5 percent, the upper limit for Ireland to resume borrowing at affordable rates.

Ireland stopped auctioning bonds in September 2010 after a sale of its 8-year bonds required a yield of 6 percent. The nation, crippled by the escalating costs of a bank-bailout program, was forced two months later to negotiate its own loan agreement with European and International Monetary Fund officials.

That €67.5 billion ($86 billion) rescue fund is due to run dry by the end of 2013. By that time Ireland will either be selling its bonds again or, like Greece, be forced to negotiate a second EU-IMF bailout.

Thursday's sale will be confined to bidding from 18 international financial houses that are recognized by the Dublin treasury as primary dealers in Irish bonds. Most are American, British, German and French banks. Just one, Davy Stockbrokers, is based in Ireland.

Davy said in an investors note it expects the new Irish bills to sell easily with yields of less than 2 percent. That would be slightly better than similar recent auctions of short-term treasury bills in Spain and Italy, both of which are seen as bailout candidates if eurozone financial chiefs fail to contain the currency bloc's debt crisis.

The other two eurozone members being financed by international bailouts, Greece and Portugal, never formally left the bond markets and have continued to sell short-term securities maturing within three to 18 months by offering premium yields.

Ireland faces a funding cliff on the other side of its current bailout. It must drum up more than €18 billion ($23 billion) in 2014 to cover its projected deficit and repay maturing bonds. Finance Minister Michael Noonan has said Ireland hopes to gradually increase the cash value and duration of new Irish treasury bills and resume normal borrowing at rates below 5 percent by mid-2013.

For more than a decade Ireland's booming economy, dubbed the Celtic Tiger, recorded impressive government budget surpluses underpinned by cheap credit, soaring consumer spending and above all a galloping housing market.

But the party ended in 2008 as a global credit crunch exposed the massive gambles that Ireland's banks had taken in the property market. Average house prices have more than halved over the past three years, bankrupting many top developers and leaving Irish taxpayers a bank-bailout bill approaching €70 billion ($90 billion).

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