When Greece sparked the euro region’s debt crisis in 2009, it set off a chain of contagion that ended up locking Ireland out of capital markets. Now, even with elections in Greece threatening to plunge that nation into fresh turmoil, Ireland is firmly back in the fold.
The Irish government, which along with Belgium’s is kicking off the euro-region’s 2015 issuance calender with a debt sale via banks as soon as today, has seen its 10-year yield tumble to a record-low 1.158 percent this week, from as much as 14.219 percent in July 2011. The nation, along with its other periphery peers, has been insulated this time round by unprecedented stimulus from the European Central Bank, and speculation policy makers will start large-scale debt purchases to counter deflation.
“With Ireland leaving the crisis further and further behind they
are less vulnerable,” said Jan von Gerich, an analyst at Nordea Bank AB in Helsinki. “The biggest difference is that the ECB has made it clear it will stand behind the euro.”
Ireland mandated Barclays Plc, HSBC Holdings Plc, JPMorgan Chase & Co., Davy, Nomura Holdings Inc., and Royal Bank of Scotland Group Plc as joint lead managers for the sale of the notes, due to mature in 2022, the National Treasury Management Agency said yesterday. The bonds may price today according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified.
Planned Sales
Belgium said yesterday it plans to sell 10-year (GDBR10) bonds via banks in the near future, while Germany, France and Spain are holding conventional auctions this week.“I don’t think Greece is going to have much of an impact,” Ryan McGrath, an analyst with Cantor Fitzgerald LP in Dublin, said yesterday. “The overriding theme in the market is the ECB’s potential sovereign-bond purchases and that’ll drive the interest in the deal,” he said, referring to Ireland’s debt sale.
Irish 10-year yields fell one basis point, or 0.01 percentage point, to 1.19 percent as of 1:17 p.m. London time. The 3.4 percent bond due in March 2024 rose 0.13, or 1.30 euros per 1,000-euro ($1,183) face amount, to 119.115.
The Dublin-based NTMA plans to sell between 12 billion euros and 15 billion euros of debt in 2015, it said last month, as Ireland moves to pay back bailout loans from the International Monetary Fund.
Prices Fall
The inflation rate in the euro area fell below zero for the first time in more than five years, bolstering the case for more stimulus from the ECB. Prices dropped 0.2 percent in December, the European Union’s statistics office in Luxembourg said today. That’s the lowest rate since September 2009. Economists in a Bloomberg survey predicted a decline of 0.1 percent. Unemployment (UMRTEMU) held at 11.5 percent in November, Eurostat said in a separate report.ECB officials gathering in Frankfurt today may discuss proposals for quantitative easing, as well as the institution’s response to Greek elections that take place three days after a Jan. 22 monetary policy meeting.
Greece has already begun an election campaign that Prime Minister Antonis Samaras said may lead to an exit from the euro region should the anti-austerity Syriza party win. Greek 10-year yields rose 86 basis points to 10.605 percent today, the highest level since September 2013.
Draghi Signal
ECB President Mario Draghi has signaled support for large-scale euro-area government-bond purchases to boost inflation, while governors including Bundesbank President Jens Weidmann favor not acting at this time.The twin factors of deflation and Greek risks are driving demand for the euro region’s safest fixed-income securities. German 30-year yields fell below 1.20 percent for the first time yesterday, while 10-year rates in Austria, Belgium, Finland, France and the Netherlands also dropped to all-time lows.
Germany’s 10-year yield was little changed at 0.46 percent today after dropping to a record 0.432 percent, while the 30-year rate fell as much as nine basis points to 1.087 percent, the lowest level since Bloomberg began compiling the data in 1994.
Irish securities returned 13 percent in the 12 months through yesterday, according to Bloomberg World Bond Indexes. Spain’s earned 15 percent and Germany’s 11 percent, while Greece’s lost 1.9 percent.
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