Ireland’s Prime Minister Enda Kenny said yesterday’s 3.5 billion-euro ($4.6 billion) bond switch is a “sign of confidence” from investors as the government seeks to return to international credit markets and exit its bailout program by the end of 2013.
Investors switched about 30 percent of government debt due in 2014 for a new note maturing in 2015, marking the Irish debt agency most significant move since bond auctions were suspended in September 2010 and the nation sought a rescue.
“We would expect to be out of the program by the end of 2013,” Kenny said in a Bloomberg television interview at the World Economic Forum meeting in Davos, Switzerland, today. “We have no intention of having a second bailout.”
Finance Minister Michael Noonan yesterday called the 2014 11.9 billion euros ($15.7 billion) maturity a “cliff hanging over us.” Spreading out repayments may mean Ireland needs to raise less cash next year to finance 2014 needs and help avoid a second bailout. Before the switch, the state had no bonds maturing in 2015.
Ireland’s October 2020 bonds, regarded as the nation’s benchmark, yielded 7.37 percent today, down from 9.1 percent at the start of December.
“They just want to buy time,” said Ciaran O’Hagan, the head of euro-area rate strategy at Societe Generale SA in Paris. “It facilitates the return to the market by smoothing the redemption profile. Ireland will be able to come back to the market if it substantially reduces its deficit.”
‘Dip in the Water’
The NTMA may seek to undertake a further swap later this year, according to a person with knowledge of the matter. The switch was a “tentative dip in the water,” Kenny said, adding it was “very successful.”
“So we look forward to whenever they decide to do the same again,” he said. “But we are in a program and we continue to make progress and meet all the conditions set down by the troika and ourselves.”
Ireland’s so-called troika bailout partners are working on a common paper on a possible restructuring of about 31 billion euros of promissory notes the state used to bail out the former Anglo Irish Bank Corp.
The paper “will be very interesting and potentially very helpful to our country,” Kenny said.
“The troika themselves now realize that perhaps greater flexibility could be shown to a country like Ireland which had to borrow very excessively before the facilities of the EFSF and the ESM actually came into being,” Kenny said. “It would be great to be able to be the first country to emerge from a bailout program.”