Anyone for some nice solid German Govt debt? Anyone ... ?

I’m sure they’ll be kinder to the Irish government, particularly as we’re looking at budget busting spending and bank underwriting and we’ve just lost roughly 5.5% of exports and one of our single biggest exporters with the Dell news.

Blue Horseshoe

The Irish auction went off OK apparently, but that was 5 year only.

ALso, not sure about the relative yields.

so what is it?

The German bond auction is a red herring
Our Bonds are sold at a premium?

Closes today apprently, no result yet. … D-UPDATE-2

DUBLIN, Jan 7 (Reuters) - Ireland’s National Treasury Management Agency (NTMA) said on Wednesday it was seeking to raise 3 billion euros ($4.09 billion) in a five-year benchmark bond and planned a further foray later this year.

“We are quite confident we will be able to do a 3 billion deal,” the NTMA’s director of funding and debt management, Oliver Whelan, told Reuters in an interview.

“It’s pretty early but there is a good spread of investors from right across Europe,” Whelan said after order books opened on Wednesday.

Investors included central banks and asset managers, he said.

Price guidance has been set at mid-swaps plus 90 basis points area, Whelan said, adding that the book was expected to close on Thursday.

“The idea is we’ll leave it open to see how much interest there may be from Asia overnight,” he said.

A glut of euro zone sovereign borrowing is expected this year as governments seek to raise funds to pay for their recession-fighting fiscal stimulus packages.

Germany was first out the block on Wednesday, shifting only two thirds of the 6 billion of 10-year paper it put up for auction, an outcome that triggered a steep fall in Bund prices and a corresponding jump in long-term yields.

Austria’s debt agency said on Wednesday it was selling a 3 billion euro syndicated 5-year bond and would price the deal on Thursday. It set a guidance of 10-15 basis points over mid-swaps for the deal, adding that it was already oversubscribed.

“With the benefit of hindsight, I am sure that both Austria and Ireland, which opened their books before the German Bund auction results were released, might have waited a couple of more days before starting the syndication process,” said David Schnautz, bond analyst with Commerzbank in Frankfurt.

“I am bewildered that Austria and Ireland are now competing in the five-year area of the yield curve like this. It may explain why they are both declaring hopes to raise 3 billion euros. It is an old tactic in the hope that the deals receive a quality oversubscription and raise more than that. But we will see if they do,” Schnautz said

No bother, sold double the plan.

“In its first bond issue of 2009, Ireland today launched a new benchmark bond, the 4% Treasury Bond which will mature in January 2014. The new bond was launched through a syndicate of banks led by Barclays Capital, BNP Paribas, Davy, HSBC and ING. The amount sold was €6 billion and is the largest syndicated bond transaction by any borrower in the very pressurised and competitive market at the beginning of the year. Strong demand of €7.3 billion from more than 140 investors across Europe enabled the NTMA to issue double the €3 billion originally intended.” … elease.pdf


IS this good or bad?

Seems we just doubled our credit limit … it still has to be paid back in 2014 + the interest!

Blue Horseshoe

Overall, I would read this as very good, the NTMA managed to raise 6 Billion now and would seem to have got a headstart versus other countries. Unfortunately, 5.1 billion goes toward a bond maturing in April 2009 but better the bird in the hand than the one in the bush.
The fact that they need to raise so much money is awful but cannto change that overnight so all in all pretty good.

It is interesting to read the take-up for last Novembers issue and it was 47% Ireland, will be interesting to see if this one is similar as we could well be seeing a flight to “quality” of local funds and a negative impact to the ISEQ as a result???

Can someone explain if that means we get 7.3 billion and simply have to pay back 7.3 * (1.04) ^ 5. ~ 88bln?

Or do these sell for less that face value?

7.3 + ((7.3*0.04)*5) ?

So 7.3 bn at a coupon of 4% = 292 mn a year
Interest of 1.46 bn over the five years, plus repayment of the principal = 8.76 bn (or were you missing a point?)

Here are the facts:

I think this is being more than a little overplayed.

so its a red herring.

No problem with issuance of goverment debt.

Especially given that most investors are looking for Bolt holes

A 4% premium in a deflationary envoronment will do very nicely. Thanks.
Obviously they also believe that default is not a risk

Were Ireland unable to raise all the cash it seeks, could this turn out to be a good thing ?

It would undoubtedly force the country to live within its means, and prevent a massive build-up of debt which we all have to repay eventually.

Of course there would be swinging cuts and tax increases (sorry mr lenihan … levy introductions :unamused: ), but we all know its better to swallow the bitter pill now than suffer death by a thousand cuts.

Ireland goes looking for €25billion at 4.1%. … ngnews.htm

Anyone notice the gulf in Austria, a country of circa 9 million looking for just €3.5billion in a 5 year bond and little old Ireland comes knocking on the door for €25billion!! We sure as hell do not deal in small change. I would balk at giving the government the loan of a fiver at the moment. I am also guessing that IF this placement succeeds then the government will have €40billion in cash early in the year as it has €16billion in cash in departmental balances. I can only suggest that there is a bigger massive bank bailout coming down the tracks that the government is not telling us about.

Anyone know why the Germans just didn’t increase the yield offered?

my thoughts on this are
Brian borrowed so Enda can pay it back…
great deal for the investors 4% …bad deal for Irelands citizens
and Id agree with mr_andrson for once, it would have been far better if we had been unable raise all 6bn, we would be better served to take the pain now, cut public spending and limit borrowing … lack of moral hazard got us into this mess, more lack of moral hazard will not get us out of it

Dont read too much into German bond not being fully subscribed, a number of banks including Lehman (Iwonder why) have dropped off the list of Bietergruppe Bundesemissionen…ie the banks who sign up and are comitted to take a minimum % of Germany govt bonds, and Barclays whihc was #1 on that list in 08 has its own issues…worryingly if coupon rate on the German bond is increased Irleland will have to increase its rate too adding a premium on our debt, all told its just the markets sending a signal that the Euro is over valued.

I suppose we can rest assured though , Davys are on the case and we got the AAA rating from Moodys so its all safe as houses

Tin Hat time…someone else posted 47% of a November issue was from Ireland… could banks in ireland be taking up some of todays bond knowing they will be getting further capitalisation down the line once the money arrives.

Sorry missed the decimal point.

The question was really about whether investors actually paid the face value or was the coupon* less?

*not sure if this is the right word

are those sums correct…the press release says they only sold 6 billion so its a coupon of 4% on 6 billion per year which is 1.2bn interest over 5 years plus par value 6 bn = 7.2bn.
Although it does say the had a 7.3 billion subscription, so possibly investors paid a premium over the face value then their investors yield is cut (0.04 x 6 billion)/7.3 billion * 100% = 3.28% . If investors paid a premium (7.3bn) this also means by my calcs we made .1 bn on the deal already all things being equal… (or is this all just 2 am mathematics!)

anyways stopped clock im not sure if the investors paid face value (6 billion) or premium (7.3 bn), hope someone out there has the answer but the coupon was set at 4% as they are Fixed Rate Bonds.
IMHO investors have an eye on the NTMA reserves if the debt does default.

An post State backed 3 year term Savings Bonds are paying 3.23% tax free per annum which is equivalent to 4.19% gross of 23% DIRT.

An post State backed 5 and 1/2 year term Savings Certificates are paying 3.53% tax free per annum which is equivalent to 4.58% gross of 23% DIRT.

The government issued the €6bn debt at 4.07%.

The little guy is actually getting a better rate than the institutional investors for a change :slight_smile:

only if the country hasn’t gone bust!