Ireland’s $4.7 Billion Debt Auction Ignores Greek CrisisDavid Goodman
When Greece sparked the euro region’s debt crisis in 2009, it set off a chain of contagion that locked Ireland out of capital markets. Now, even with elections in Greece threatening to plunge that nation into fresh turmoil, Ireland is firmly back in the fold.
The Irish government, which kick-started the euro-region’s 2015 issuance calender with a debt sale via banks today, has seen its 10-year yield tumble to a record-low 1.158 percent this week, from as much as 14.219 percent in July 2011. The nation drew bids from over 160 investors as it sold 4 billion euros ($4.7 billion) of seven-year notes to yield 0.867 percent, the debt office said.
Ireland, along with its other periphery peers, has been insulated from the latest Greek crisis by unprecedented stimulus from the European Central Bank, and speculation policy makers will start large-scale debt purchases to counter deflation.
“With Ireland leaving the crisis further and further behind they are less vulnerable,” said Jan von Gerich, an analyst at Nordea Bank AB in Helsinki. “The biggest difference is that the ECB has made it clear it will stand behind the euro.”
Belgium today set the size of a 10-year debt sale through banks at 5 billion euros, priced to yield 0.883 percent, that nation’s debt agency said. France and Spain are holding conventional auctions tomorrow.
Irish 10-year yields increased four basis points, or 0.04 percentage point, to 1.24 percent at the 5 p.m. London close. The 3.4 percent bond due in March 2024 fell 0.34, or 3.40 euros per 1,000-euro face amount, to 118.645.
The Dublin-based National Treasury Management Agency plans to sell between 12 billion euros and 15 billion euros of debt in 2015, it reiterated today, as Ireland moves to pay back bailout loans from the International Monetary Fund. The record-low yields mean Ireland and its peers are able to borrow at cheaper levels to replace securities that are maturing.
Ireland mandated Barclays Plc, HSBC Holdings Plc, JPMorgan Chase & Co., Davy, Nomura Holdings Inc., and Royal Bank of Scotland Group Plc as joint lead managers for the sale of the notes, due to mature in 2022, the NTMA said yesterday.
“The overriding theme in the market is the ECB’s potential sovereign-bond purchases and that’ll drive the interest in the deal,” Ryan McGrath, an analyst with Cantor Fitzgerald LP in Dublin, said yesterday.
The inflation rate in the euro area fell below zero for the first time in more than five years, bolstering the case for more stimulus from the ECB. Prices dropped 0.2 percent in December, the European Union’s statistics office in Luxembourg said today. That’s the lowest rate since September 2009. Economists in a Bloomberg survey predicted a decline of 0.1 percent. Unemployment held at 11.5 percent in November, Eurostat said in a separate report.
Greece has already begun an election campaign that Prime Minister Antonis Samaras said may lead to an exit from the euro region should the anti-austerity Syriza party win. Greek 10-year yields rose 93 basis points to 10.68 percent today, reaching the highest level since September 2013.
ECB President Mario Draghi has signaled support for large-scale euro-area government-bond purchases to boost inflation, while governors including Bundesbank President Jens Weidmann favor not acting at this time.
The twin factors of deflation and Greek risks are driving demand for the euro region’s safest fixed-income securities. German 30-year yields fell below 1.20 percent for the first time yesterday, while 10-year rates in Austria, Belgium, Finland, France and the Netherlands also dropped to all-time lows.
Germany’s 10-year yield rose four basis points to 0.48 percent today after dropping to a record 0.432 percent, while the 30-year rate increased six basis points to 1.24 percent after sliding to 1.087 percent, the lowest level since Bloomberg began compiling the data in 1994.
Irish securities returned 13 percent in the 12 months through yesterday, according to Bloomberg World Bond Indexes. Spain’s earned 15 percent and Germany’s 11 percent, while Greece’s lost 1.9 percent.