Ireland to return to bond market within year, says Danske Bank
Green shoots in Ireland’s economy could see the Irish government return to the international bond market within a year, according to Danske Research, part of Denmark’s Danske Bank.
Danske Research said in its latest note on the country that while many years of painful austerity and deleveraging of the country’s banking sector remain, the key question for bond investors is whether the country is sufficiently recovered to start issuing bonds before the end of 2013.
Currently Ireland relies on an €85bn EU/IMF funding programme, which covers its finances up to the end of 2013. But that support effectively cuts the country off from bond markets, and it can only return once the National Treasury Management (NTMA) believes it is prudent to do so. However, the NTMA has also publicly stated that it wants to start issuing bonds before the end of 2013. The NTMA has not issued any new bonds since September 2010, although it facilitated a “switch” in January this year, when it exchanged €3.53bn of 4% into 4.5% bonds.
Danske Research believes that if Ireland agrees to the EU Fiscal Stability Treaty on 31 May, the NTMA could be issuing T-bills as early as June or July this year.
Five and 10-year bonds could be issued by the end of 2012, or early 2013, with the market for Irish government bonds normalising further through next year with a broader investor base and narrowing of yield spreads against European peers.
Currently, the Irish government bond universe consists of 12 bonds – 10 benchmarks, two non-benchmarks – equivalent to an outstanding amount of €83.16bn, Danske said.
“The maturity profile reveals that less than €10bn of debt matures in 2013 and 2014, respectively, but most of it is Irish government bonds. In 2015-16, €11.7bn and €17.2bn of debt will mature, respectively, but roughly half of this will be from EU/IMF facilities.”