Ireland sells bonds at record-low yield

AP News
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Posted: Oct 09, 2014 9:14 AM
Ireland sells bonds at record-low yield

DUBLIN (AP) — Ireland's treasury sold 10-year bonds at a record-low yield of 1.63 percent on Thursday, providing the latest evidence of the country's strong rebound from a debt crisis and international bailout.

The treasury said its auction, which raised 1 billion euros ($1.28 billion), was 2 ½ times oversubscribed. The yield was far below Ireland's previous record-low 2.3 percent paid to sell 10-year government bonds in July.

The exuberant interest in Irish debt securities has strengthened the country's case for repaying its 2010 bailout-loan package early to eliminate what now appear to be excessive interest costs on the money.

Ireland is expected to exceed its deficit reduction targets for both this year and 2015, when the country is expected to post a deficit well below 3 percent of gross domestic product, the official European Union limit. Ireland's job is being made easier by surprisingly strong economic growth this year, with the government and Irish Central Bank forecasting 2014 growth of at least 4.5 percent.

Prime Minister Enda Kenny said he expected Ireland to post growth rates exceeding 3 percent for the next six to eight years. High growth makes deficit targets easier to reach, because the tax take grows, welfare bills shrink, and the deficit percentage declines relative to the size of the economy.

EU partners still need to formally approve Ireland's recent agreement with the International Monetary Fund to repay its 22.5 billion-euro ($29 billion) portion of the 2010 loan aid. The IMF charges Ireland an average rate of 4.99 percent, representing an interest bill exceeding 1.12 billion euros ($1.43 billion) per year. By contrast, the yields achieved Thursday on that size of loan would represent an interest bill of just 367 million euros annually, less than a third of the IMF financing costs.

Ireland resumed normal borrowing on bond markets last year, ended reliance on bailout loans in December, and hopes to sell billions in bonds next year to start wiping the IMF loans off its books.

Also Thursday, Ireland's Central Statistics Office said inflation was just an annual 0.3 percent in September, as the cost of services and education rose while the price of many goods continues to fall.

Finance Minister Michael Noonan is expected to unveil tax breaks and other economy-stimulating measures in his 2015 budget being unveiled Tuesday, but overall it is expected to be Ireland's eighth straight austerity budget.

Noonan already has ruled out imposing 2 billion euros in new tax hikes and spending cuts in 2015, the original target agreed with EU and IMF bailout officials when Ireland still was reliant on their emergency loans.