THE NATIONAL Treasury Management Agency (NTMA) raised €1 billion yesterday in its final bond auction of 2009.

This brings the total raised in the bond markets this year to €33.8 billion. Of this, €10.8 billion was issued through a series of nine monthly auctions, with €23 billion raised in four syndicated issues. A further €1.4 billion in funding was raised in the small or retail debt market.

The Irish bond auction came as European Central Bank (ECB) president Jean-Claude Trichet warned that budget excesses in some European countries could still derail economic recovery, although the outlook was generally looking up.

Mr Trichet said some countries were running the risk of losing markets' faith due to excessive deficit and debt levels.

"Some countries are in a relatively favourable position because their past management was wise and prudent, while others are already very close to losing their credibility," he told French newspaper Le Monde.

"The success of the recovery in Europe depends on the confidence of investors in the creditworthiness of sovereign issuers."

Portugal, Greece and Ireland have either had their sovereign bond ratings downgraded or been put on review by major credit agencies in recent months.

Yesterday there was solid demand for the bonds. There was some €200 million of 4 per cent debt maturing in 2014 to yield an average of 3.072 per cent, and €800 million of 5.9 per cent debt maturing in 2019 to yield 4.735 per cent.

Investors bid for 7.9 times the 2014 debt offered and 2.5 times the 2019 securities offered, the NTMA said. In total, bids for €3.63 billion were received.

"Greater risk appetite generally among market investors helped in having a successful sale, but there is no doubt that international investors are feeling increasingly comfortable about buying Irish paper," said Bloxham economist Alan McQuaid.

Bond sales may decline in 2010 because of an expected drop in redemptions and the use of some money raised this year to pre-fund for 2010, Anthony Linehan, deputy director of funding and debt management at the NTMA, said last week.

Mr Linehan also said the extra yield investors demanded from holding Irish bonds over the benchmark German government securities should narrow in the coming months as there was "greater clarity" about the financial situation in Ireland.

The difference in yield, or spread, between 10-year Irish securities and 10-year German bonds was 139 basis points yesterday, compared with 153 basis points a month ago. - (Additional reporting Reuters)