Categories Uncategorized Ireland Re-Enters Bond Market Post author By Philip Lane Post date July 26, 2012 67 Comments on Ireland Re-Enters Bond Market 26-07-2012 NTMA Announces Bond Switch and Outright Sale. 26-07-2012 Offering Circular for new 5.50% Treasury Bond 18 October 2017. Related ← More on competitiveness → Governance for the Eurozone: Integration or Disintegration? 67 replies on “Ireland Re-Enters Bond Market” Ireland’s never gonna get back in the market, its broke, its insolvent, its a ward of the Troika etc etc…. Pacta sunt servanda then, eh? We can pay anything! Sounds a bit like a patient hospitalised following a car crash, in for a very long time, has just been down to the hospital shop for the first time. In her pyjamas. + But.. but Stiglitz and Krugman said this couldnt happen….. Seafoid, Steady on, did she go down for 20 Bensons or VIP mag? Why are we borrowing at 6% on the market when the Troika is still lending at 3%? Would the NTMA swap all €14bn of eligible bonds for more expensive longer term debt? Is their an undisclosed issue limit? “…Stiglitz and Krugman said this couldnt happen….” Cites, please? One for each will suffice. Will this not be used by those pesky Creditor nations too deny us debt relief on our mistakes? @ Tull VIP magazine. Someone up on the ward had it and there was a glamorous 4 page spread on Mrs Corrigan’s new house , made completely out of recycled cardboard. @Kevin Donoghue “Cites, please? One for each will suffice.” Krugman May 7, 2012, 3:01pm http://krugman.blogs.nytimes.com/2012/05/07/pain-without-gain/ “Strange to say, markets have remained firmly unconvinced…Ireland is still nowhere near regaining market access.” (Maybe he meant at rates as cheap as Germany.) too bad for the doomsayers…….. @ Bond. Eoin Bond I would suggest to keep the champagne on ice! We have a bit of form in losing the run of ourselves and even if things go as planned next year, given the iffy real economic outllook for some years, there would be more people with red faces than John Corrigan if bond prices started to spike again. The economic reality is in fact worse than the headline figures suggest. Will we be told who these buyers are? I,for one, would not be thrilled if it was my pension fund. @MP The notional 10 year is still yielding more than 450 bps over Bunds. So there is some doom priced in, innit. And when will we get a real 10 year? http://markets.ft.com/RESEARCH/Markets/Government-Bond-Spreads jackh, thanks that’s a more apposite response than I expected. Good luck to the NTMA! Do we know the sums involved? Can’t see reference to any values in the press release/term sheets. I agree with MH – this is good news but we haven’t quite reached the promised land. – Rates of 5.5-6% would still be unsustainable if we didn’t have access to official sources as a back-up. – Irish yields collapsed in the wake of the last summit and that could easily be reversed if no meaningful bank debt deal is reached. – The Irish bond market is clearly still dysfunctional and illiquid and hasn’t been reacting to news in the same way as the Italian debt market. Clearly, the international focus is elsewhere for now. I expect the auction to go well with enough domestic demand for these robust yields. But in the long term we will need sustained demand from international investors thoughout the business cycle and we are a bit far from that yet. MH, JC would love bond prices to spike as he could sell more of the stuff. Did you mean yields? @ tullmcadoo Yields! @ Bazza “I expect the auction to go well with enough domestic demand for these robust yields. But in the long term we will need sustained demand from international investors thoughout the business cycle and we are a bit far from that yet.” Im hearing most of this will be international investors @BEB As usual so! Amounts will be interesting as previously mentioned. Was the bond issue enough to cover the Health overspend in q1 ? Are results expected tonight or tomorrow morning? Big enough to cover the Healthcare overspend plus Burton overspend plus Leo’s bail out of the busses. No bondholders burned there-senior or junior. Do we not learn the success or not of the auction liove like? It was a long time ago, but… The NTMA used to advertise the range of values that would be on offer http://ntma.ie/Publications/2010/IrishTreasuryBillAuctionDetails23Sept10.pdf And, from recollection, they used to post results about a half hour after the auction had taken place http://ntma.ie/Publications/2010/ResultsIrishGovtBondAuction21September2010.pdf @ Jagdip as explained in the circular, all bonds switched and issued today will be at the pre-set, publicised rate, there will be no ‘range’ of values. Auction closed around 35 mins ago, results expected shortly. Interesting that the jurisdiction of the bonds is Irish. Didn’t some Greek bonds issued fall under English law? Can anyone explain the impact of this? @Eoin, Aah, I mean they used to say, for example, “we will auction E300-700m of 5-year bonds” That is omitted from the announcements as far as I can see, but I suppose it is academic as the results will presumably make clear the cover. But if you don’t have a pre-announced range, then how can you calculate cover? What happens if E100bn of bids come in at the publicised rate? Results out – €1.040bn switched, €4.193bn new bonds sold, total issuance €5.233bn. Also, could any success at this stage just be traditional Italian and Spanish buyers just switching into Irish for now? Should Italy and Spain get their game together (so to speak), would this impact NTMA’s strategy? @Aiman Well those results aren’t too shabby and SPN/ITA would have been happy to accept them! Still though (!!!), when the ESM is lending at 3%, why have we just given away E780m on the E4bn new bonds at average 6% for average 6.5 years. 2014 “funding cliff” now a hillock, going on those numbers. But what it does mean is that we are funded to end of 2013 now, and if we can convince someone to take on the E3bn Bank of Ireland/Anglo gig which matures in June 2013, then we get to early 2014. @ Jagdip all order filled in full at pre-set rates (though NTMA reserves right to refuse orders) Did the NTMA get lucky today? The Draghi factor did wonders worldwide…Spain 10yr in about 45bp. Question is…will it wear off when Angela returns from holiday and says Nein. @NTMA Nice one! Skelp o that will go far inreinvigorating the €1.7 billion Limerick City and €1 billion Donegal regeneration projects. @Bond Is the billion “switcher” take up disappointing? DOD, MOat will go towards maintaining the premium salaries that our public servants enjoy over their fellow citizens in the EU. Good day for the govt which you despise and whose competence you deny. Bad day for your pal Pearse the engineer. Small steps. Welcome but small. Shuffle really. Also Eoin I think your first post is rather disingenuous. We were always able to issue debt the q is at what cost. We get ESM at 3? We issue now at 6. For shorter times. To me it seems a demonstration of macho man economics. The new issue will cost an additional 3% of €5bn or €150m/year So our deficit will be €150m wider – every year from now on. Why are we doing this again? @anewdawn “We get ESM at 3? We issue now at 6. For shorter times. To me it seems a demonstration of macho man economics.” This is quite a pivotal question. As regards “We get ESM at 3%?” That is really asking: “If we have to borrow, why should we pay a market rate that relates to Ireland’s fundamentals when we could use much cheaper ‘Eurobonds’?” The German response would be that there are no Eurobonds and the fact that the cheaper borrowing fron Eurobonds would reduce the already small determination to Gernanify the Irish economy, means you are not getting any. Ntma will have sold this to investors as ‘yield reflects risk’. The politicians should be spinning to the rest of the EZ that it has been sold to investors as pricing in a significant ESM retrospective banking and IBRC bailout – and if there isn’t one Ireland will be out of the markets again. Interesting timing just before the holidays. I suppose there is a sizeable market out there for yield in euros and perception has improved a lot since october even if the overview hasn’t. @Grumpy “The politicians should be spinning to the rest of the EZ that it has been sold to investors as pricing in a significant ESM retrospective banking and IBRC bailout – and if there isn’t one Ireland will be out of the markets again.” +1 Agree….but they won’t…it will be more ..look at the great job we are doing. Just looking at the Minister for Announcements, Richard Bruton, gives a flavour. Any idea what percentage took the switch?..it looks small at 1 billion. And what does it tell us? To answer my own question.. We have 6 b of 2013 and 8 b of 2014 bonds outstanding according to ISE site. So the take up on the switch was really small..I wonder why? F, Just guessing that a large % of the short end is owned by a supra national financial institution who wants out of it’s position. CARTOON OF THE DAY – Angela & Wolfgang sing the moody blues …. Germany Settling scores 26 July 2012 Cicero Berlin http://www.presseurop.eu/en/content/cartoon/2418811-settling-scores Have to laugh at FF complaining about an interest rate not much worse than the Brians got us on the November 2010 don’t-call-it-a-bailout. Time & timing & The NTMA 07/26/2012 ECB Signals Bond Purchases Markets Surge after Draghi Vows to Protect Euro It was the signal investors were waiting for. The European Central Bank “is ready to do whatever it takes to preserve the euro,” its president, Mario Draghi said on Thursday. Markets leapt because the statement was a strong signal that the ECB will resume its program to buy the bonds of struggling euro nations. All it took was () three sentences. “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough,” Draghi told an investment conference in London to mark the beginning of the Olympics. “To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate.” http://www.spiegel.de/international/europe/markets-surge-after-ecb-president-mario-draghi-vows-to-protect-euro-a-846629.html On Wednesday, German newspaper Süddeutsche Zeitung cited EU sources as saying the temporary bailout fund EFSF could step in to buy Spanish government bonds. The deflation/austerity preserves relative wealth; inflation corrodes wealth and debt alike. Who doubts they will in the end print as much as necessary? @ Fiat A lot if the guys owning shorter term debt (ie 13s and 14s) have no interest in turning it into longer term debt, so it was somewhat as expected. Say the ntma got most of the o/s debt switched into fresh debt at 6%. I presume most of the tiger debt has a lower nominal yield. What would be the extra interest bill and how much new austerity would be required to offset it? The indo had an article recently regarding how interest payments had risen after TSHTF and at around 100% of gdp at 6% you’d presumably need lots of new taxes to pay for the shift, stunning and all as it might at first appear. Can ireland work with 6% on bonds and sub 1% economic growth? Is there a limit to how much of the existing debt can be switched? @ Seafoid we took 3 month t-bills at 1.80%. They currently yield around 1.1%. We could probably issue a 3yr at c.4.25%. This is part of an overall funding model. We aren’t going to issue everything at 8y 6%. Further, as we get more funding in, it will become cheaper to fund the next round. On top of that, regaining market access will likely eventually lead to a rating upgrade, again reducing borrowing costs. Its a drawn out process. Woohoo! We are back baby! Anyone who says otherwise should commit suicide Time to upgrade the government jet and also start compensating our public representatives for their financial sacrifices during the recent blip! Along the lines of Grumpy’s comment, I’d question the timing of this auction in the context of seeking a deal on our debt with Europe. My preferred strategy would be a ‘look we’re completely fooked’ approach. I think we’re now in a weaker position. @ Ahura the alternative is you say “look, we managed to get a bond issue away cos you finally said you’d fix the bank/sovereign link at last” @Ahura/Grumpy/Bond Schauble praising us today for getting back in the bond market. How can we go with the begging bowl for relief if we can borrow in the market. Btw, it seems we will need 24b to cover redemptions and deficits over the next two years. Might be a big ask? @BEB Thanks for your reply. Is it not the case that any new issues will be at a higher yield than most of the stuff issued pre 09? How much was 2 yr issued in 2008? My understanding is that it is not just that there is more sov debt but that on average it is also more expensive. What is the average nominal yield on the current debt? I imagine it will be a windy road back so well done yesterday. @ seafoid average funding rate pre-crisis was around 4.7%, probably average weighted maturity of 6yrs. 5yr ireland was 5.5% in Q3 2000 and 5.15% in Q1 2002. The stuff we issued in 2005-2009 was at all time lows, due to both zero credit risk as well as very low inflation (though not particularly low ECB rates), which created cyclically low interest rates (we currently have crisis-low rates, not normal-low rates). Anyone claiming that they are sure Ireland is insolvent and cannot afford rates around 5-6% is making unmoveable assumptions around inflation and nominal GDP growth in my view, as well as making assumptions that Ireland cannot benefit from continued lower moves in Irish yields like we have seen in recent months. Why would it suddenly stop now? @ Anewdawn only getting to these 1 by 1… “We were always able to issue debt the q is at what cost.” When does you spaceship return to your planet? @ Rory Mc “Interesting that the jurisdiction of the bonds is Irish. Didn’t some Greek bonds issued fall under English law?” All Irish bonds have always been issued under Irish law (with some very small legacy exceptions). Most Greek bonds were under Greek law and got haircut, but some international/english law bonds are holding out at the moment 07/27/2012 Out of Left Field A New Idea to Save the Common Currency By Christian Rickens Germany’s Left Party is not often associated with neo-liberalism. But a new proposal from a senior party member could provide a way out of the cycle of bailouts and bank aid. Why not just reboot the market economy and then cushion the fall? … Astoundingly, however, there really is a novel approach out there — on the far left of the German political spectrum, no less. Its author, Sahra Wagenknecht, is the deputy floor leader for the Left Party in the Bundestag, Germany’s parliament. Wagenknecht, now 43, joined the East German communist party SED in 1989 just a few months before the fall of the Berlin Wall. Until 2010, she was the most prominent member of the Communist Platform, the Marxist wing of the Left Party. Read on: http://www.spiegel.de/international/europe/german-left-party-proposes-new-way-to-save-the-euro-a-846788.html @BEB Let’s see but much of the growth in the oecd since 1980 has been driven by credit expansion and that machine is now banjaxed. FYI 07/27/2012 German Financial Regulator Elke König ‘It’s Time to Search for Alternatives’ Elke König is the head of the Germany’s Federal Financial Supervisory Authority (BaFin). In a SPIEGEL interview, she discusses the scandals rocking the banking world and what needs to be done to rein in its casino culture. http://www.spiegel.de/international/business/interview-with-bafin-head-elke-koenig-on-changes-in-banking-regulations-a-846619.html Mario Dragi great plan for august 2012 ECB to Europes politicians august beech month ahead that means summer holiliers on the euro debt crisis lets clock off now and resume the charade in september i want to turn my phone off this year oh for the quite life A fund manager from Manulife stated in an interview that PIIGS bonds may be worth considering after the dust has settled in 2 1/2 years or so. His pick of foreign bonds on a risk/reward basis is the Phillipines. We have to take seriously that the German economic intelligentsia as well as the people on the street believe that the PIIGS were and are irresponsible, greedy, lazy, work shy, tax evaders as opposed to the responsible, hard working, Germans who bit the bullet ten years ago and made Germany into the paragon of virtue that it is today. Until the rest of the EZ governments wake up and stop absorbing bank debt the Germans will continue to delude themselves. The problem has to be allowed to back with the inevitable result that DB and Commerzbank will fail or be bailed out by German taxpayers. Ireland has to stop being Patsies and wake up and smell the Jameson. Comments are closed.