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Ireland regains market access for both government and bank bonds

In yesterday’s links, I pointed to two links showing that Ireland had regained bond market access. Here is more evidence that Ireland is regaining bond market access.

First, there was the Franfurter Allgemeine article that said Ireland was going to market with 4-year paper. I said “they believe their recovery warrants their ability to tap bond markets at decent yields. They had already gone to market for short-term paper in the summer but now they are putting a toe in the long end to see appetite for Ireland. Given BBVA’s low yield and the appetite for risk it shows, this seems like a good time for Ireland to go to market.”

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Then, the second article, released after a successful bond auction said Ireland “added €2.5 billion by way of a syndicated tap to its 5.5% bond maturing October 2017. It paid a yield of just over 3.31%, which is sharply lower than the 5.9% yield at the time when the bond was launched last July.” I saw that as good news for sure, a demonstration Ireland was on its way out of the bailout category unless still falling house prices created a double dip.

Today, we learned that not only the government but the most well-known nationalised bank has access to bond markets. Here’s the Irish Independent:

THE government has sold €1bn bonds used to bailout Bank of Ireland to international investors in a surprise deal.

The amount of so called “contingent capital” sold in today’s deal doubled during an intense bidding session earlier today, with bids of as much as €4.8bn on the table.

The €1bn bonds of bonds were sold for €1.01bn, slightly above face value, so there is a small profit for the government on the deal.

Buyers, including some Bank of Ireland shareholders, get 10pc interest per year from the bank for holding the debt.

The deal means a further reduction in the €4.7bn that the state pumped into Bank of Ireland to prevent its collapse.

The government currently holds 15pc of the Bank of Ireland.

Okay, that’s a huge coupon, 10%. But t got 4.8 billion euros of bids for this deal. That’s 4.8x oversubscribed. I would call this an unmitigated success. Ireland is really the only country in the euro zone that consistently showed good PMI data throughout 2012. The country’s export sector is doing well. And  the country’s yields are declining rapidly. The problems for Ireland now are the high rate of unemployment and the still declining housing market. I wouldn’t say that Ireland has turned the corner under any circumstances. But, the country is close and it is the best indication to me of why I am more upbeat about the underlying fundamentals globally than I was in 2012. Yes, the financial crisis is not over. However, the problems in Europe and the US are now mostly political.

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About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.