Danske Markets recommends clients buy, as Irish return to bond market

Danske Markets, part of Danske Bank, has said that the announcement by the Irish debt office, the National Treasury Management Agency (NTMA) that the country is returning to the bond market today is “extremely good news”.

The announcement comes as a surprise to the market, but should not be a complete shock Danske Markets said. Last week the NTMA said it intended to issue bonds sometime between now and early 2013.

“However, few had expected the bond sale to be this soon,” Danske Markets said in a note today.

“We predicted in April that Ireland would return to bond markets within a year – at that time a brave non-consensus call as Irish funding costs were then high and rising.”

The NTMA will carry out two operations. One is a switch, under which holders of existing 5%2013 and 4% 2014 Treasury Bonds can exchange them for a new 5.5% 2017 Treasury Bond. The other is the sale of a new 5.5% 2017 and tap of the existing 5% 2020 Treasury Bond.

“Ireland has no redemptions in 2017, which makes this maturity an obvious choice for a new series.”

Danske Markets said that it would recommend its clients take part in the latest NTMA activity, as it sees the terms and conditions as “very favourable”.

“We are convinced that rating agencies will remove Ireland from negative watch on the back of the renewed market access and we will not be surprised to see Ireland being put on review for upgrade back to investment grade in the near future.”

According to Danske Markets’ figures, Irish two year yields are trading at about 3.8%, with nine year benchmark yield at about 6%.

That compares with Spanish two year yield of 6%, and 10 year yield of about 7%.


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