Irish Alleviate Looming Funding ‘Cliff’ With 30% Bond Switch

Jan. 25 (Bloomberg) -- Ireland’s debt agency will switch about 30 percent of a note due to be repaid in 2014 for one maturing a year later, smoothing the nation’s funding needs as the government seeks to return to international debt markets.

In its most significant move since Irish bond auctions were suspended in 2010, the National Treasury Management Agency said it will switch 3.5 billion euros ($4.6 billion euros) of an 11.9 billion euro-bond due for payment in January 2014 for a new note maturing in February 2015. The agency priced the new security, which has a 4.5 percent coupon, at a 5.15 percent yield.

“The extension of funding by just over one year helps the agency’s funding profile,” Glas Securities, a Dublin-based fixed income firm, said today in an e-mailed note. “International participation could have been higher if the terms had been more generous.”

Irish Finance Minister Michael Noonan today called the 2014 maturity a “cliff hanging over us” as the state seeks to regain its economic sovereignty after a bailout in 2010. Spreading out repayments may mean Ireland needs to raise less cash next year to finance 2014 needs and help avoid a second bailout. The state currently has no bonds maturing in 2015.

“A successful Irish debt swap could encourage other peripheral issuers to offer voluntarily swaps of short-term bonds with new issues of longer maturities to ease their refinancing schedules,” Sercan Eraslan, a fixed-income strategist at WestLB AG in Dusseldorf, wrote in an e-mailed research note.


The agency may repeat the operation later this year, according to a person with knowledge of the matter, who declined to be identified as the process has not been completed. The yield on the 2014 bond bought back by the NTMA is 4.9 percent.

Ireland’s October 2020 bonds, regarded as the nation’s benchmark, yielded 7.38 percent today, compared with 8.15 at the start of November.

“Today’s exercise is a very positive surprise for an Irish bond market that has seen no NTMA involvement since September 2010,” said Donal O’Mahony, a strategist at Dublin-based securities firm Davy. “It reflects the sustained improvement in market sentiment over the past two months.”

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