Although most market watchers are rightly devoting most of their energies to the likelihood and fallout from Spanish or Italian bail-outs, they and policymakers may wish to pay some heed to Ireland’s capital markets renaissance.
The stricken sovereign auctioned its first treasury bills last week and a full-on syndicated new issue may not be such a distant prospect. How the Irish got to this point is — from a capital markets perspective — admirable.
The expectation that Europe will pitch in with a Spanish-style banking sector bail-out — and thus relieve the Irish sovereign of part of the €64bn of debt that it was saddled with after rescuing its banking sector in 2008 — helped with the sale and the Irish commitment to austerity and economic reform has been well documented. But the Irish have used other admirable ploys.
Senior debt capital market bankers have a sense that there is a syndicated new issue mandate to be had from Ireland in the not too distant future. The fees and prestige of leading that trade will have encouraged primary dealers to pay up for the three month bills. That neatly glosses over any lack of end-investor interest that there may have been and keeps yields low. The end result is a keenly priced sale with a healthy bid to cover ratio.
Then there is the groundwork the Irish laid beforehand. Since early 2011 the Irish National Treasury Management Agency had been marketing itself to money market investors and selling clips of commercial paper where it could. That was all part of the process of easing investors back into Irish debt holdings.
The sale of bills last week now places a benchmark yield for where Irish paper should trade in short dates. Steadily but surely, Ireland is building confidence in its debt issuance once again.
Such measures may not be suitable for Spain or Italy who are, in any case, not entirely barred from market access at the moment and have not needed a full sovereign bail-out. But while Europe fears the outcome of the Greek bail-out and tries to avoid contagion to bigger economies and markets, it looks like a there is at least one success story being written somewhere in the Eurozone.
