Ireland is back in the bond business

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Ireland is back in the bond business

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Ireland has made a storming return to the international bond market.

Investors were extremely keen to lend the Dublin government money in the first sale of debt since it exited an European Union and International Monetary Fund bailout following its bank crisis.

In a test of market confidence in Ireland’s recovering economy, it placed 3.75 billion euros of government bonds, maturing in 10 years time.

Interest on them – known as yields – is just over 3.5 percent. That compares with a peak of about 15 percent for similar bonds in 2011 as the eurozone’s debt crisis intensified.

Demand was so strong it could have sold four times as many.

Tuesday’s sale put Ireland nearly half way to its target of raising eight billion euros this year and the country’s debt agency would aim for regular modest auctions through the rest of 2014, its head John Corrigan said.

“Auctions have to be an important part of the re-entry into the market mechanism, but I think today’s success means we can move forward with confidence on that front,” Corrigan said.

Investors took the Irish success as a hopeful sign for other troubled countries in the eurozone periphery.

Yields on Spain’s 10-year benchmark bond fell nearly 10 basis points to 3.81 percent, while their Greek equivalent fell by 38 basis points.

Ireland formally exited its 85 billion euro bailout on December 15, having sought the rescue in 2010 after a burst property bubble crippled the country’s banks and blew a hole in the public finances.

The high demand for bonds comes as Ireland’s economy shows signs it is picking up steam, with the jobless rate falling to 12.5 percent
from a 2012 peak of 15.1 percent and the government expecting GDP growth of 2 percent this year.

Nevertheless, some investors have expressed concerned about its national debt, which at 124 percent of GDP remains among the highest in the European Union.