Ireland's 10-year bond sale over-subscribed

Scofflaw

The NTMA offered €3bn in 10-year bonds, and had €12bn in offers. After discussions, €5bn in debt was issued, at an overall rate of 4.15%.

The Finance Minister Michael Noonan has described as "extraordinary" the response to Ireland's first 10-year bond sale since the Troika bailout.

The minister said "we're well on our way" to leaving the programme.

It is understood that the Government had hoped to borrow around €3bn and there were offers totalling €12bn.

Mr Noonan said, after discussions with the National Treasury Management Agency, we will now borrow €5bn.

The average interest rate is expected to be around 4.15%, well below the highs of more than 14% when we were forced into the bailout.

The move means the country is now all but financed up to the end of next year, a remarkable change to where we were three-and-a-half years ago.

http://www.irishexaminer.com/breakingnews/business/noonan-hails-extraordinary-response-to-irelands-10-year-bond-sale-587852.html

We may have kicked the can around the corner...

cordially,
Scofflaw

Bits_n_Bobs

The numpties free to borrow more money again to spend on god knows what..."jobs" most likely. I don't want to turn that corner.

Sponge Bob

Thatnk God for some Good News after all the Mingery in this forum.

The key factor was the 4x oversubscription €12bn of bids for €3bn of product) as much as anything else. 4.15% is not great but if a smaller issue can be got off at a psychologically important 3.xx% rate and is similarly oversubscribed then we can say bye to the IMF early IMO. June would be a good time for one.

A lot of our old bonds are coming up for refinancing so don't anybody think that this is all new borrowing.

I think that between old borrowing refi and new borrowing we need €25bn of funds between now and end 2014 so €5bn is a good start and ideally should be repeated twice by year end after a smaller issue tests the rate first.

Chips Lovell

But we all know that austerity doesn't work. Right?

Godge

Sponge Bob wrote: »

Thatnk God for some Good News after all the Mingery in this forum.

The key factor was the 4x oversubscription €12bn of bids for €3bn of product) as much as anything else. 4.15% is not great but if a smaller issue can be got off at a psychologically important 3.xx% rate and is similarly oversubscribed then we can say bye to the IMF early IMO. June would be a good time for one.

A lot of our old bonds are coming up for refinancing so don't anybody think that this is all new borrowing.

I think that between old borrowing refi and new borrowing we need €25bn of funds between now and end 2014 so €5bn is a good start and ideally should be repeated twice by year end after a smaller issue tests the rate first.

Can't remember the figure to be needed by end 2014 but there was to be a crunch point early next year after the bailout ended. By borrowing this money, as well as the shorter-term stuff borrowed already, I think we already have enough financing between the bailout money yet to be drawn down and this new financing to get through that crunch point.

Symbolically, it would be astonishing if we ended up not drawing down the full bailout funding.

Chris_5339762

I think the very large crunch point was sorted (or at least mitigated) a while ago.

Sponge Bob

Symbolically we need to be self sufficient BEFORE the IMF program ends and Symbolically we need to hand back some of the bailout money .....as in not draw it all down to the last cent.

We were getting 15 years off at 4.5% in April 2008 so we either try a long issue of substance and at a rate ANYWHERE below that benchmark or else to get a shorter maturity off at a 50bp spread over the Italians and Spanish and under 3.99% ...my reckoning anyway.

Either way we must send product to market to reestablish post bailout benchmarks and much of that in €5bn gobs AND not to our own banks looking to meet some Basel target or other.

Furthermore we must to an extent market make for Spain and Italy and especially Portugal so a push pull co ordination plan is required especially with the latter who want to issue 10 year paper too.

I think the prop desk herd has buggered off long into stocks in the past 2 years and bonds are back to being quiet and boring to an extent, they may well ch

ange their minds after the (inevitable ) next stock market correction. My inclination is to go for a 15 year at under 4.5% in May or June and hope at least €3bn on a 3x oversub comes in under that number.

And well done to the NTMA.

spank_inferno

quick question on a gov bond:

If a 10 year bond has a yield of 4.5%:

Does that mean the purchaser gets 4.5% every year? (ie: 45% after 10 years)
or
4.5% across the whole 10 years? (ie: 0.45% per year)

Thanks!

Cookie_Monster

Scofflaw wrote: »

The NTMA offered €3bn in 10-year bonds, and had €12bn in offers. After discussions, €5bn in debt was issued, at an overall rate of 4.15%.

Can you (or anyone) explain to me why if we have 4x subscribers at 4.15% we didn't lower the rate to say 3.8% to see the interest and continue to move it around until we got to the desired level, rather than simply say "hooray, we're popular again, let's borrow even more"

carpejugulum

This means they believe Europe will indeed pick up the tab.

spank_inferno wrote: »

quick question on a gov bond:

If a 10 year bond has a yield of 4.5%:

Does that mean the purchaser gets 4.5% every year? (ie: 45% after 10 years)
or
4.5% across the whole 10 years? (ie: 0.45% per year)

Thanks!

Nobody would buy this at 0.45/year

Sponge Bob

Cookie_Monster wrote: »

Can you (or anyone) explain to me why if we have 4x subscribers at 4.15% we didn't lower the rate to say 3.8% to see the interest and continue to move it around until we got to the desired level, rather than simply say "hooray, we're popular again, let's borrow even more"

You need to balance the 2 requirements, some of the €12bn 'subs' may have been at 5.4% and relatively little at say 4.01% , they needed to get €3bn off or it would have been a disaster. So going a bit over which bids the accepted and at an acceptable price while ignoring the other €7bn fo bids was probably the right thing to do in every way.

The NTMA raised half their requirements for this year already and should get busy on the H1 2014 requirements as early as possible and especially if Spain is coming in looking for large amounts of wonga.

squod

Headline; Banks buy their own bonds to see guaranteed profits.


Great news OP. Great for people who are on the receiving end of Noonans gifts.

Geuze

spank_inferno wrote: »

quick question on a gov bond:

If a 10 year bond has a yield of 4.5%:

Does that mean the purchaser gets 4.5% every year? (ie: 45% after 10 years)
or
4.5% across the whole 10 years? (ie: 0.45% per year)

Thanks!

Most of the time, interest rates are quoted annually.

antoobrien

Cookie_Monster wrote: »

Can you (or anyone) explain to me why if we have 4x subscribers at 4.15% we didn't lower the rate to say 3.8% to see the interest and continue to move it around until we got to the desired level, rather than simply say "hooray, we're popular again, let's borrow even more"

The bonds issued yesterday were issued at 3.9% interest, as specified in the [URL="file:///C:/Users/paobrien/Downloads/IrelandTreasuryBond20March2023OfferingCircular.pdf"]bond circular[/URL]

The yield represents the resale value of the bond on the secondary bond market, and is a market estimate of how good or risky an investment a bond is. A yield of 4% means that if you have 100m in bonds, you'd expect to sell them on at approx 104m.

The only relevance of bond yields to the primary market (i.e. NTMA) is that high yields make it unlikely for bond buyers to part with their money as it implies that the bond may not be paid out at the end of the contract.

20Cent

Might be a stupid question but if its oversubscribed and an auction can they ask for a lower rate or is the 4.15% the result of lowering it during the auction?

antoobrien

20Cent wrote: »

Might be a stupid question but if its oversubscribed and an auction can they ask for a lower rate or is the 4.15% the result of lowering it during the auction?

4.15% is nothing to do with that NTMA (on behalf of the government) pay, that's the price premium that somebody selling the bonds on the secondary market can expect to get.

And no they can't change the interest coupon after the bond circular is posted.

Geuze

The coupon on this new 2023 bond is 3.9%.

So the State will pay 3.90 euro interest per annum on each 100 euro par value bond.

Note that the bonds may not have been initially sold at their par value, and note that their market value can vary on a daily basis.

The 4.15% yield mentioned in the press release suggests that the bonds sold slightly below par?

http://www.ntma.ie/news/ntma-raises-5bn-from-sale-of-new-10-year-benchmark-bond/

Nody

20Cent wrote: »

Might be a stupid question but if its oversubscribed and an auction can they ask for a lower rate or is the 4.15% the result of lowering it during the auction?

Lets keep the example simple; Irish state goes on the market to request 3 Billion in 10 years bonds and request qoutations.

The market (i.e. companies, funds etc.) come back with the following offers:
2 Billion @ 7%
0.5 Billion @ 3%
3 Billion @ 5%
1.5 Billion @ 3.75%
2 Billion @ 5.5%
3 Billion @ 10%

Total subscription is 12 Billion (great, we got plenty of choice); looking at the original offers for 3 Billion we'd pay:
0.5 Billion @ 3%
1.5 Billion @ 3.75%
1.0 Billion @ 5% (only taking 1 out of 3 Billions offered)

Over all interest on the book is 4.04%

Due to the offers how ever we decide we'll get some more money in because we got such nice offers and we had budgeted a higher average rate. So we look back at the book for another 2 Billion.

So we add:
2.0 Billion @ 5%

Our new interest is: 5 Billion in the book at a blended interest rate of 4.425%.

It is very rare that you'll ever see an auction be fully utilized due to the bids put in there (i.e. the 3 Billion at 10% example above to represent a hedge fund giving outragous bid in the hope you're desperate and don't get a good deal from others).

Cookie_Monster

antoobrien wrote: »

4.15% is nothing to do with that NTMA (on behalf of the government) pay, that's the price premium that somebody selling the bonds on the secondary market can expect to get.

so why is it quoted then, just lazy journalism?

antoobrien

Cookie_Monster wrote: »

so why is it quoted then, just lazy journalism?

Basically, with probably a bit of misunderstanding how it all works.

Scofflaw

antoobrien wrote: »

Basically, with probably a bit of misunderstanding how it all works.

Journalism - helping people misunderstand public affairs since the eighteenth century.

cordially,
Scofflaw