Irish Debt Rallies After ECB Deal on Anglo Irish Bank

Ireland’s five-year note yields fell to the lowest in more than seven years after the nation won an agreement to restructure the costs of rescuing the former Anglo Irish Bank Corp.

Under the plan, dubbed ‘Project Red,’ Ireland will swap so called promissory notes used to rescue the failed lender with long-term bonds with maturities of up to 40 years. The accord will ease the nation’s borrowing needs over the next decade by 20 billion euros ($26.8 billion).

Irish officials have been trying to reach a deal with the European Central Bank for the past 1 1/2 years over the issue, which has dogged the country’s attempts to work its way out of an international aid package.

The accord increases “the probability that the sovereign will be in a position to regain full market access and exit the bailout successfully at the end of the year,” said Juliet Tennent, an economist at Goodbody Stockbrokers in Dublin, in a note today.

Ireland’s five-year note yield fell as much as 11 basis points, or 0.11 percentage point, to 2.80 percent, the lowest since October 2005. It was at 2.82 percent as of 11:24 a.m. London time.

The government had been due to give Anglo Irish 3.1 billion euros a year for at least the next decade to pay down a central bank loan. Now, the first capital payment is due in 2038 and the last in payment will be made in 2053.

“We have replaced a short-term, high interest rate overdraft that had to be paid down quickly through more expensive borrowings, with long-term, cheap, interest-only loans,” Irish Prime Minister Enda Kenny said yesterday.

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