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Government borrows €4bn from bond markets at record low rate

The Government has borrowed €4bn from the bond markets at the lowest price in the history of the State.

The level of market interest could have seen the Government borrow as much as €5.75bn.

The yield – effectively the cost of borrowing – on the bonds is 0.867 pc.

Cantor Fitzgerald Ireland’s head of fixed income strategy, Ryan McGrath, said the sale was “a satisfactory result” for the National Treasury Management Agency (NTMA).

“They issued towards the upper end of expectations so that was a positive for them, and this was a record low rate in the seven-year area,” Mr Grath said.

“They’re raising money at historically low levels which clearly is beneficial to the Irish taxpayer,” he added.

The Government is expected to use the money to help repay another chunk of IMF loans early, in order to save on interest payments.

The historically low yields are being spurred in part by expectations that the ECB will soon embark on a sovereign bond-buying programme in order to kickstart the flagging European economy.

Last month the NTMA, headed by Conor O’Kelly, said it wants to issue €12bn-€15bn of Irish bonds this year.

It has committed to issuing a statement at the beginning of each quarter outlining its auction plans for that quarter.

Meanwhile, Greek 10-year government bond yields are back above 10pc.

The rate on the securities climbed as high as 10.61pc yesterday as investors abandoned the bonds in the run-up to an election that Prime Minister Antonis Samaras said will determine Greece’s euro membership.

Greek stocks also fell yesterday, posting the biggest decline among 18 western-European markets.

The ASE Index of Greek shares fell 1.5pc, and were set for the lowest close since November 2012. With a 29pc slump, the ASE posted the world’s worst performance among equity indexes after Russia last year.

The double-digit yield on Greek sovereign bonds is reminiscent of the euro region’s debt crisis. In 2012, Greece’s 10-year rates climbed as high as 44.21pc before the nation held the biggest reorganisation of sovereign debt in history.

“Investors seem to be very wary of trying to catch a falling knife,” said Michael Leister, a senior strategist at Commerzbank AG in Frankfurt.

“The news flow remains very much in flux. This looks likely to continue so we get another two or three weeks of volatility and pressure on Greek bonds.”

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