THE STATE raised a further €1 billion yesterday through the sale of two bonds in its first auction of Government debt in four years.
The borrowing cost to the State on the bonds is the second highest in the euro zone ahead of Greece.
The State’s money manager,the National Treasury Management Agency (NTMA), raised €700 million from a bond maturing in 2020 and a further €300 million from a bond due in 2011. This brings to €11 billion the total raised from Government bond sales this year.
The sale of the two bonds was the first to be sold to investors at auction since October 2005.
The NTMA raised €6 billion through a five-year bond in January and €4 billion on a three-year bond sale last month.
Both bonds were sold in syndicated deals where the securities are sold by a group of banks to investors they have lined up.
Auctions are regarded as riskier and tend to raise smaller amounts as banks take the Government bonds onto their books before selling them on to investors.
The NTMA intends to raise further funding through monthly auctions in April, May and June to fill the deepening hole in the public finances.
The auctions will take place on the third Tuesday of each month and the NTMA is hoping to raise between €750 million and €1.25 billion at each auction.
The Government aims to raise a record €25 billion this year to meet the budget deficit following the collapse in tax receipts due to the sharp slump in the economy.
The yield on the bonds, the borrowing cost to the State, was 3.459 per cent on the 2011 bond and 5.808 per cent on the 2020 bond.
Oliver Whelan, director of funding and debt management at the NTMA, said that only Greece was paying investors more for its equivalent sovereign bonds.
“The only one outside of us at that end of the curve would be Greece,” he said.
Mr Whelan said the bond sale showed there was still an appetite among investors to buy Irish Government debt. Investors bid 3.8 times the 2011 debt offered and 2.7 times the 2020 debt sold.
“It is a sign of hugely positive sentiment towards the Irish bond market that has surpassed our expectation. It indicates that there are investors there who are willing to invest in Irish bonds,” he said.
Mr Whelan could not say how much of the money raised came from Irish financial institutions.
However, he said that traditionally the amount raised from Irish investors on bonds of this size was between 10 and 12 per cent.
Some 55 per cent of investors who subscribed to last month’s three-year bond were Irish.
Irish 10-year bonds climbed after the auction, reducing the difference in yield, or spread, between Government debt and the equivalent German bond, the benchmark for investors, to its narrowest level in three weeks.
The spread between Irish and German 10-year bonds widened to 284 basis points, or 2.84 per cent, last week, its widest level in 10 years, but fell to 249 basis points yesterday.
The cost of insuring against the Government defaulting on its debts also fell, according to credit default swap prices, which are viewed as a proxy of financial risk.
