Less than 3 years after seeing off an international bailout programme, the Republic of Ireland issued a 100 year bond that was snapped up by investors. The €100 million deal was arranged by Goldman Sachs and Nomura. The yield was a staggering 2.35%, significantly less than the yield on a AAA rated 10 year Australian bond that is currently trading at around 2.50% and even less than the yield on a 30 year US Treasury at around 2.65%.
It was only in 2011 that an Irish 10 year bond was trading as high as 14.2%.
“This ultra-long maturity is a significant first for Ireland and represents a big vote of confidence in Ireland as a sovereign issuer,” said Frank O’Connor, NTMA director of funding and debt management.
Since exiting the bailout programme, the cost of borrowing in Ireland has reduced dramatically, in part due to the country getting its financial act together and in part due to the ECB’s quantitative easing programme. Under the ECB QE programme, the Bank is buying €80 billion each month of bonds in an attempt to flood the market with money and stimulate the economy. This has pushed yields to historically low levels.
One of the side effects of QE is that asset prices become skewed as more and more money chases fewer assets. 100 years is a long time to wait to get your money back and this latest bond issue may well be looked back upon in the similar manner to the tulip bubble of the early seventeenth century. But for Ireland it is most likely a great deal. It has locked in 100 years of funding at a ridiculously low interest rate. To be sure.