Ireland may sell treasury bills within weeks, returning to international debt markets after almost two years.
European Central Bank President Mario Draghi said yesterday the nation may be able to return to markets in the “not too far distant future” after last week approving the European Union’s fiscal treaty in a referendum. The National Treasury Management Agency may seek to sell short-term securities in June or July, Chief Executive Officer John Corrigan said in January. A NTMA spokesman declined to comment.
“They are on track to do something in the next 10 days or so,” said Owen Callan, a Dublin-based analyst at Danske Bank A/S, a primary dealer in Irish debt. “The elephants in the room are the Greek election and Spain, but at this point my feeling is 70 percent to 75 percent they’ll go this month.”
Even as Ireland mulls a return to markets, the euro-region debt crisis is escalating. Spain, which has resisted pressure to become the fourth euro-area nation to seek a bailout, called on June 5 for the first time for European funds to shore up its banks. In Greece, voters go to the polls for a second time in six weeks on June 17, in an election which may determine if the euro region survives intact.
“It would be more prudent to wait until after Greek elections, more likely into July, when hopefully we’ll have an orderly market,” said Barry Nangle, head of fixed income at Davy, also a primary dealer in Irish debt. “Market intelligence would lead us to believe there is demand out there.”
Ireland’s government has laid out its plan “to try and put a toe in the water later this year which would be a necessary first step, were it to occur, to a full” re-entry next year, John Moran, head official at the country’s finance ministry told lawmakers in Dublin today. Returning to markets may offer a “trade-off” between regaining a degree of economic sovereignty and accessing cheaper funding in a bailout program, he said.
The yield on Ireland’s 2020 bonds, considered the benchmark, fell 2 basis points to 7.36 percent today. Irish borrowing costs have risen from 6.84 percent on May 3, before the Greek election, when voters failed to produce a government.
In contrast to Ireland, Greece and Portugal kept selling bills after international authorities bailed them out. Portugal yesterday sold 1.5 billion euros ($1.9 billion) of 12- and six-month bills that allowed the country to reach its issuance target for the first quarter.
The securities due in June 2013 were issued at an average yield of 3.834 percent, falling from 3.908 percent at the previous auction of 12-month bills on May 2.
At its first sale, Ireland may seek to sell between 500 million euros and 600 million euros of bills initially at a yield of 2 percent or below, Callan at Danske said.
The government stepped out of the bond markets in September 2010 and sought a 67.5 billion-euro bailout, as the costs of one of world’s worst banking crises became too big to handle alone. With Ireland’s aid program due to run out at end of 2013, Finance Minister Michael Noonan said in December the NTMA may seek to sell bills in the second half of this year as a step to full market access in mid-2013.
“They’ll probably go at the end of June or early July, as long as they find a sweet spot,” said David Tinsley, a London-based economist at BNP Paribas SA, another primary dealer. “They’ll probably wait till after the Greek election, because the last thing they want is to come back a second time after a Greek election goes wrong and not be able to get it away.”