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Borrowing costs plummet for Ireland as re-entry into the markets gathers pace

The Irish Minister for Finance, Michael Noonan (left) with the head of the Irish National Treasury Management Agency, John Corrigan, at a press conference disclosing information of the auction

On Wednesday morning, September 12th, the Republic of Ireland hosted only it’s third bond auction since entering an EU-IMF bailout program in 2010. And while the other two auctions were noted as very positive developments for the eurozone member, this newest advancement smashed all expectations in a magnificent result for the country. The yield was just 0.70% as €500m was raised.

In comparison to an auction several months ago, selling precisely the exact same type of bonds, the yield demanded from investors was 1.80%, therefore Ireland fared more than 2.5 times better this time around with the interest rate. As well as raising the half a billion euros with an encouragingly low interest rate, the level of attraction from investors also hit a new high, with demand for the bonds at a rate of 3.03 for the amount on offer.

The auction was impeccably timed with a court ruling in Germany, which gave the official go-ahead to the establishment of the European Stability Mechanism (ESM). The ESM fund gives financially beleaguered nations such as Ireland, extra monetary support in the event that they are not meeting their fiscal targets towards the end of their bailout program and in the early stages of being free from any such program. With this certainty, at least in the short-term, instilled in investors, they saw Ireland as a worthy investment.

The Irish Minister for Finance, Michael Noonan, told reporters after the auction was conducted that it ”once again highlights the improvement in market sentiment towards Ireland.”

The chief of the Irish National Treasury Management Agency, John Corrigan, also commented on the ”very positive” auction that took place and he envisages that Ireland will ”achieve sustainable bond market re-entry over the coming months and throughout 2013.”

Jean-Claude Juncker, President of the Euro Group (left) and Michael Noonan (right) meeting earlier today in Nicosia, Cyprus

And Ireland’s week could be set to get a whole lot better as the finance minsters of the eurozone met in Cyprus today to discuss the ongoing difficulties facing the single currency members. One of the issues being discussed is the possibility of the Irish bank debt and sovereign debt being separated and thus alleviating the national debt burden placed on the Irish state.

 

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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