UPDATE 2-Ireland to issue first new benchmark bond since bailout

Tue Mar 12, 2013 4:37pm EDT

* New issue in 'near future', possibly Wednesday

* Main step in planned return to full-market funding

* Ireland on course to be first euro zone country to exit bailout

By Stephen Mangan and Padraic Halpin

DUBLIN, March 12 (Reuters) - Ireland is to issue its first new benchmark 10-year bond since its EU/IMF bailout in the "near future", its debt agency said on Tuesday, a landmark on its route to becoming the first bailed-out euro zone country return to full market funding.

The National Treasury Management Agency (NTMA), which began borrowing again from capital markets last year, had earmarked a new benchmark issue as its most significant step towards a full market return ahead of regular bond auctions later this year.

One industry source said the books were expected to open on Wednesday. The NTMA made a similar pre-announcement in January before it opened its five-year syndicated deal the next day.

The new bond, to mature in March 2023, will be Ireland's first benchmark bond since soaring yields forced it to take refuge in a 85-billion euro ($110 billion) bailout in 2010.

The notes will be issued through a syndicated transaction subject to market conditions, with details to be announced in "due course", the NTMA said in a statement.

One industry source said the debt agency was expected to issue a minimum of 2.5 billion euros. A second industry source said it would likely be between 2 and 3 billion euros.

DEMAND SEEN STRONG

"It will be significantly well oversubscribed. There is a lot of demand that had been waiting for the bond issuance for the last number of weeks," said Ryan McGrath, a bond dealer at Dolmen Securities, who said he expected to see yields somewhere between 4.25 percent and 4.40 percent.

The head of the NTMA said regular auctions would probably be enough to see it qualify for the ECB's Outright Monetary Transactions (OMT), a scheme the government has said it would like to apply for in due course.

Dublin wants to have backstops like potentially unlimited ECB bond purchases and the availability of a conditional line of credit from official lenders in place as it exits its bailout to make investors more comfortable to lend it money.

The ECB launched the OMT program last September to counter investor fears of a euro zone breakup but it has yet to deploy it, with some policymakers at the bank preferring to keep it under wraps.

ECB policymaker Benoit Coeure, who says the program is ready for use, told Reuters last month that Ireland had not yet demonstrated the regular market access deemed necessary for qualification and that Frankfurt needs to see issuance at different points across the yield curve.

Ireland already is on course to get off support from the EU and IMF after raising over a quarter of its long-term funding target for this year in January by selling 2.5 billion euros of five-year debt.

Its steady market return has been helped by a sharp fall in Irish bond yields over the past 18 months. Irish debt now trades below the equivalent levels of Spanish and Italian government bonds, two fellow euro zone strugglers which have avoided sovereign bailouts.

Yields on Ireland's current benchmark 2020 bond were little changed at 3.7 percent on Tuesday after falling last week on a pledge by European Union finance ministers agreed to look at how to extend the maturity of emergency loans Ireland and Portugal have received under their bailouts.

In July 2011, the yield on the same bond had stood at more than 15 percent.

The NTMA said it had mandated Barclays, Danske Bank , Davy stockbrokers, Goldman Sachs International , HSBC and Nomura as joint lead managers for the new 10-year bond.

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