Ireland re-enters the bond market

Voltex

Looks like Ireland has successfully dipped its toe into the Capital markets. The NTMA has flipped some of the bonds due in 2013 and 2014 and raised "new money" to the value of 4 big ones!

http://www.independent.ie/business/european/government-raises-over-5bn-in-return-to-bond-markets-3180928.html

Personally, I think this was a super success for both the NTMA and Ireland.

Stheno

I thought it was good news too seems ahead of schedule?

Sand

It'd be intriguing to identify the purchasers of these bonds. Perhaps I shall examine the next Central Bank figures on the holdings of Irish government debt by the state owned Irish banks.

Scofflaw

OK, I admit that's well in advance of my expectations, but then I would also have expected them to wait for slightly lower rates than they had to offer. On the other hand, perhaps issuing is an important step in impressing the markets.

Still, as Sand says, this would look a whole lot less impressive if the bonds were taken up by state-owned banks.

cordially,
Scofflaw

Nonoperational

The majority from foreign investors it appears http://www.irishtimes.com/newspaper/breaking/2012/0726/breaking25.html ,

Seems to be a very positive move all considered. Bit higher rate than we probably should be paying but hopefully the increased positive sentiment will repay some of that in future auctions. We really are starting to distance ourselves a bit from the other bailout countries in a considerable amount of international opinion so hopefully we can consider this progress.

Stheno

gpf101 wrote: »

The majority from foreign investors it appears http://www.irishtimes.com/newspaper/breaking/2012/0726/breaking25.html ,

Seems to be a very positive move all considered. Bit higher rate than we probably should be paying but hopefully the increased positive sentiment will repay some of that in future auctions. We really are starting to distance ourselves a bit from the other bailout countries in a considerable amount of international opinion so hopefully we can consider this progress.

The one thing that doesn't seem to be mentioned is whether or not the offering was oversubscribed? Now I'm not great at the whole economics jargon, but what I mean is how much interest was there versus how much was bought? I.e. was it oversubscribed?

I also remember thinking when I heard it on the news at lunchtime that there it was kept very quiet prior to it happening.

dvpower

Scofflaw wrote: »

Still, as Sand says, this would look a whole lot less impressive if the bonds were taken up by state-owned banks.

cordially,
Scofflaw

I'm not sure I understand.
Can state owned banks take risks with their money that are based around putting on the green jersey?

Scofflaw

dvpower wrote: »

I'm not sure I understand.
Can state owned banks take risks with their money that are based around putting on the green jersey?

I presume they could buy Irish government bonds - it's a normal sort of purchase for a bank - although it would hardly be much of a vote of confidence. However, as gpf101 says, the word is that it's "largely foreign investors".

cordially,
Scofflaw

Sand

Noonan says only that he "understands" the majority of the funds to be from foreign investors. I wouldn't take Noonan's word alone tbh - afterall he has previously understood that Irelands economy was going to take off like a rocket and that the ECB was going to give us a deal on the promissory notes last March. And the "understands" statement has enough get out clauses in it.

It wouldn't be the first time the government has used the state banks to run a shell game with money. Lets wait for the Central Bank figures before going nuts.

antoobrien

dvpower wrote: »

I'm not sure I understand.
Can state owned banks take risks with their money that are based around putting on the green jersey?

If it's only the Irish banks or even banks that have a lot of ECB money the perception will be that this is an ECB backed move. It'd be a whole lot better looking for us if it was "other" investors as it would be a vote of confidence in us vs looking like the ECB shoring us up (as they have tried to do with Italy & Spain).

Heads the ball

I think this is way too soon to open the champagne.

I understand that one of the tranches was issued at 6+%. I would remind people here that 7% is considered unsustainable

everdead.ie

Heads the ball wrote: »

I think this is way too soon to open the champagne.

I understand that one of the tranches was issued at 6+%. I would remind people here that 7% is considered unsustainable

Tell me what's the value of the CDS's you have against Ireland?

I don't think anyone is poping anything but niether are we going to dismiss its importance to the confidence it gives investors in Irish bonds or the milestone it is in our recovery process.

antoobrien

Heads the ball wrote: »

I think this is way too soon to open the champagne.

I understand that one of the tranches was issued at 6+%. I would remind people here that 7% is considered unsustainable

And yet it (the 2017 bond in question) is not the most expensive bond we have on the market. The interest rate (as opposed to the yield) on said bond is 5.5%.

Heads the ball

antoobrien wrote: »

And yet it (the 2017 bond in question) is not the most expensive bond we have on the market. The interest rate (as opposed to the yield) on said bond is 5.5%.

Yield is just another word for the effective interest rate. So my point remains.

When you refer to 5.5% are you referring to the coupon on the bond?

Heads the ball

everdead.ie wrote: »

the confidence it gives investors in Irish bonds

Eh, they are demanding 6+% so no, they are not confident if they are demanding that premium which we will have to pay

antoobrien

everdead.ie wrote: »

I don't think anyone is poping anything but niether are we going to dismiss its importance to the confidence it gives investors in Irish bonds or the milestone it is in our recovery process.

It should not be underestimated that the effect of this swap & sale has reduced the amount of money that has to be raised to fund the 2014 bond maturity considerably.

Yesterday morning there was €8,227.34m due to be repaid in 2014, after the swap there's €7,882.65. Then there's the €4.193 billion "new money" that has been raised.

We're not ignoring the fact that things are still tight, after all we've pushed the problem a few years down the road (2020 now has almost €20bn due for repayment). However the fact that the international investors have come in is a good sign.

everdead.ie

Heads the ball wrote: »

Eh, they are demanding 6+% so no, they are not confident if they are demanding that premium which we will have to pay

Well we are hardly going to be getting it at 1 or 2 per cent are we.

As Danske are rporting they are expecting this to mean that Ireland will have its negative outlook upgraded by the three rating agency's and Moody's to upgrade Irish bonds to Investment grade due to the take up of Irish Bonds.

everdead.ie

antoobrien wrote: »

It should not be underestimated that the effect of this swap & sale has reduced the amount of money that has to be raised to fund the 2014 bond maturity considerably.

Yesterday morning there was €8,227.34m due to be repaid in 2014, after the swap there's €7,882.65. Then there's the €4.193 billion "new money" that has been raised.

We're not ignoring the fact that things are still tight, after all we've pushed the problem a few years down the road (2020 now has almost €20bn due for repayment). However the fact that the international investors have come in is a good sign.

I'm not saying we have fixed anything just that this is a very important step to becoming self reliant again.

I also doubt we will ever repay the debt we have built up unless it is transferred to the banks and off the national debt then we might so a near future decrease but we will continue to roll over bonds until the debt to GDP ratio is around the 60% mark and then we will probably increase our spending marginally to keep it at that level.

antoobrien

Heads the ball wrote: »

Yield is just another word for the effective interest rate. So my point remains.

When you refer to 5.5% are you referring to the coupon on the bond?

Yes.

The yield (to maturity) on the 2020 bond is higher because it's held for 3 years longer. The interest rate on the 2020 bond is actually 0.5% lower than the 2017 bond (so it'd actually be cheaper if we could have gotten more on this bond).

Take a look at the outstanding bond to see the rates we are paying. They range from 4.0% at the low end to 5.9% at the high end for benchmark bonds. So it's not like these are unsustainable - they're at the high end of what we've been paying, but not by any means the highest.

There are other, much older bonds that are attracting 8.25 & 8.75% interest (but the outstanding amounts are minimal - €25.75m)

antoobrien

everdead.ie wrote: »

I'm not saying we have fixed anything just that this is a very important step to becoming self reliant again.

Agreed (sorry if it sounded like an attack).

everdead.ie wrote: »

I also doubt we will ever repay the debt we have built up unless it is transferred to the banks and off the national debt then we might so a near future decrease

It should be pointed out that the banks aren't the main problem with the debt (due to use of the NPRF in the recapitalizations) they account for about 25% of the total debt. The rest is due directly to public spending.

everdead.ie wrote: »

but we will continue to roll over bonds until the debt to GDP ratio is around the 60% mark and then we will probably increase our spending marginally to keep it at that level.

I think the new Amortizing bonds (announced last week) will be useful in reducing the debt raio to the 60% mark. It will allow us to refinance small chunks of debt and pay it back over the lifetime of the bonds, instead of all at maturity.

The bonds issued yesterday seem to be standard bonds, so it'll be interesting to see if/when they are sold what the uptake will be.

Heads the ball

antoobrien wrote: »

There are other, much older bonds that are attracting 8.25 & 8.75% interest (but the outstanding amounts are minimal - €25.75m)

So again - i dont think this is a sign of the corner having been turned or "stability" or otherwise great news

antoobrien

Heads the ball wrote: »

So again - i dont think this is a sign of the corner having been turned or "stability" or otherwise great news

Context - the last two outright sales made were for €1.5 bn each (August & Sept 2010).

This January we swapped 4bn of 2014 debt for 2016 debt. Yesterday we swapped/sold 5.23bn.

That's a total turnover of 9bn in bonds - which it took 6 separate issues to do in 2010.

I'd take that as a sign that the investment community have faith in our ability to repay.

djpbarry

Heads the ball wrote: »

So again - i dont think this is a sign of the corner having been turned or "stability" or otherwise great news

You’re trying to counter a point that nobody is making. Ireland’s return to the bond markets is being hailed as ... Ireland’s return to the bond markets. Nothing more, nothing less. It’s another step along the long road to normalisation and, perhaps more importantly, puts a little more distance between Ireland and Greece/Spain in the PR stakes.

Sand

antoobrien wrote: »

Yesterday morning there was €8,227.34m due to be repaid in 2014, after the swap there's €7,882.65.

Doesn't that basically say that 96% of people due to be paid out in 2014 decided it was better to get out of Ireland ASAP than increase their stake in Ireland?

@djpbarry

Ireland’s return to the bond markets is being hailed as ... Ireland’s return to the bond markets. Nothing more, nothing less. It’s another step along the long road to normalisation and, perhaps more importantly, puts a little more distance between Ireland and Greece/Spain in the PR stakes.

Why? Spain and Greece have been issuing debt throughout the crisis. How does doing the same as Spain and Greece make us different to Spain and Greece?

I admit - I find it hilarious that Spain has joined the list of countries that all other countries are apparently not. Ireland is not Spain. Amirite?

everdead.ie

Sand wrote: »

Doesn't that basically say that 96% of people due to be paid out in 2014 decided it was better to get out of Ireland ASAP than increase their stake in Ireland?

@djpbarry


Why? Spain and Greece have been issuing debt throughout the crisis. How does doing the same as Spain and Greece make us different to Spain and Greece?

I admit - I find it hilarious that Spain has joined the list of countries that all other countries are apparently not. Ireland is not Spain. Amirite?

Ireland did not try to swap all the debt?

Defiler Of The Coffin

Investors are assuming a bank deal will be made though?

[Jackass]

Scofflaw wrote: »

I presume they could buy Irish government bonds - it's a normal sort of purchase for a bank - although it would hardly be much of a vote of confidence. However, as gpf101 says, the word is that it's "largely foreign investors".

cordially,
Scofflaw

I would be extremely doubtful that not only would state owned banks have the resources to pour into Irish bonds to even make a dent in the figures (given the realignment of the debt burden / loan book shortfall in capital reserves being the main reason behind their inability / unwillingness to lend), but given that it is effectively state money running through the banks, they (the tax payers / the Government) would be borrowing off themselves at a rate of c. 6%. I'd be amazed if a single bond holder was an Irish bank.

Heads the ball wrote: »

I think this is way too soon to open the champagne.

I understand that one of the tranches was issued at 6+%. I would remind people here that 7% is considered unsustainable

Your contributions to this forum are really becoming tiresome. We all know you want to talk down any progress the Economy and more notably this Government makes, but the only thing I find interesting about anything you say is trying to figure out whether you are the ultimate pessimist with a poor understanding of Economic issues, or (even more likely) whether you are a Shinner or a Fianna Fail die hard looking to contain and conduct damage control on how well this Government is cleaning up the mess they inherited.

Please try and be constructive with your points, not necessarily positive, but if you're going to persue your agenda, at least try and be creative and make a point remotely accurate or coherent in the context of what is being discussed.