NTMA raises €1bn in bond sales

The Government has sold €1 billion in five- and 10-year bonds as part of its efforts to raise a record €25 billion State borrowing required this year.

The National Treasury Management Agency (NTMA), the body which manages the Government’s debt, auctioned €300 million of 4 per cent notes maturing in 2014 to yield an average of 3.90 per cent, and €700 million of 4.4 per cent securities due 2019 to yield 5.19 per cent.

Investors bid for 4.8 times the 2014 debt offered and 1.8 times the 2019 securities available.

The Government is raising cash as the economy shrinks at the fastest pace among the euro-area nations, leading to sharp declines in tax revenues.

The nation’s credit rating was lowered one level to AA+ with a “negative” outlook by Standard & Poor’s this year as its finances deteriorated.

“The fact that they managed to raise the maximum amount they wanted for this auction is an encouraging sign,” said David Schnautz, an interest-rate strategist at Commerzbank AG in Frankfurt.

“We still see Irish bonds as a riskier asset, but things have improved a lot. I don’t think they will face a buyers’ strike.”

The NTMA raised €2 billion in auctions in March and April and €10 billion in two bond sales managed by banks in January and February.

The government expects the budget deficit to widen to 10.8 per cent of gross domestic product this year, more than three times the European Union limit.

The difference in yield, or spread, between Irish and German 10-year government bonds narrowed three basis points to 178 basis points today.

It jumped to 284 basis points on March 19, the most in 10 years, compared with an average of 20 basis points over the past 10 years.

Minister for Finance Brian Lenihan, who held meetings across Europe this week to reassure investors about Ireland’s creditworthiness and is in Frankfurt today, said yesterday money managers have been “impressed” by the Government’s tax increases and spending controls.

Additional reporting Bloomberg