Cantillon: State’s first 30-year bond sale a €4bn coup

Only five weeks into 2015 and the National Treasury Management Agency (NTMA) has already raised more than half of its €12 billion-€15 billion debt issuance target for the year. The sale of the State’s first 30-year bond on Tuesday realised €4 billion, taking the total raised so far this year to €8 billion.

That’s a coup, although these are truly extraordinary times in bond markets. The maiden 30-year debt was sold at a seriously low annual yield 2.088 per cent, lower indeed than the rate on Irish five-year debt only three months ago.

More interesting still, however, is that Irish 30-year bond was issued at a lower cost to the current cost of comparable US paper. An American bond due in November 2044 was trading yesterday at 2.41 per cent. An important distinction must be drawn, in that the US bond is a dollar debt while Ireland’s debt is issued in euro. If it follows that we’re not in the realm of strict equivalence, we’re not far off it either.

How things change. When Ireland was shut out of debt markets in 2010, the notion of issuing super-long debt would have been fanciful. At that time, indeed, it seemed as if the only market for Irish bonds was right here at home. As the NTMA noted, however, all but 5 per cent of the 30-year paper was taken up overseas. The big buyers were in Britain (26 per cent) and Germany (24 per cent).

It’s not all about investor enthusiasm for Ireland, however. Yields right across the euro zone are at a record low as Mario Draghi ) and the ECB ready themselves for full-blown quantitative easing, So there’s rather a lot of cash in circulation looking for a home – and yield. Indeed, Ireland sold six- month treasury bills last week at a zero yield last week. Key here is that the ECB is charging banks interest to hold money for them. Better to shelter cash at no cost than to pay for a safe haven.

Ultra-safe Finland raised the bar yesterday to became the first euro zone country to sell five-year debt at a negative interest rate. Where Helsinki goes. . .