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Irish road to recovery continues with further prosperity in the bond market

Ireland’s nine year bond yields closed below 6% for the first time since  October 2010. The country’s yield dropped to 5.97%, the lowest level in 22 months and almost two years on since the beginning of their EU-IMF bailout program.

This welcome development is particularly useful as it comes ahead of the Irish National Treasury Management Agency’s (NTMA) plan to raise up to €1bn of amortizing bonds. If those bonds are raised as easily as their last two bond auctions, the Irish government are expected to use that extra money to increase the country’s borrowing capabilities as well as address an insufficiency in the pension funds.

In addition to the NTMA’s amortizing bonds plan, the organization said it expects to raise between €3-5bn over the course of the next 18 months, especially with inflation-linked bonds.

This comes as the borrowing rates for both Spain and Italy also dropped, with the Spanish one dropping sharply by almost 1%. But it’s not only Ireland, Spain or Italy who have benefited from lower borrowing rates as a wave of positive sentiment swept across the continent, with several other countries taking advantage of these kinder rates.

A chart displaying a steep decline of the Irish bond borrowing rate since November 2011.

The assured belief is a result of high hopes that the European Central Bank will take the necessary steps this week to move closer to fixing the problem of the euro crisis. However, we have had many false dawns of this euro crisis being solved in the past four years and although there are signs that this could be the week, there is nobody getting their hopes up too highly on this occasion.

The good news comes on the back of the Emerald Isle’s great success last month as the republic managed to auction off their first long-term bonds since November 2010. In that instance, the Irish exceeded their own expectations of returning to the markets in 2013, 6 months in advance.

 

 

Written by Patrick Devaney

Patrick Devaney is a second year student at the National University of Ireland, Galway where he is studying economics and political science.

Patrick was born in 1993 and during his childhood years, the Celtic Tiger ‘’boom’’ times were beginning to take off. The foundations of a society that lived lavishly and to great excess were being laid. Unfortunately, these foundations were built on quick sand and by 2007; the beginning of the end had begun. With decisions about his future looming as the problems escalated, Patrick made the choice of studying about what went wrong in my country: economically and politically. With both of his parents threatened with redundancies in the last few years, Patrick's own hopeless job searches and experiencing the day-to-day pressure of these austere times, he has lived through the hardest times we have known since the Great Depression – and we’re not even sure how much long this could possibly go on for. Through his blog on Inspired Economist, he hopes to be a voice for common sense and conscience in a time when so many economic decisions are ill-chosen for a variety of reasons to the detriment of the public.

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