UPDATE 2-Flush with cash, Ireland delays debt sales until 2014

Tue Oct 1, 2013 10:12am EDT

Related Topics

* As bailout exit looms, to make next move in 2014

* Fully funded through 2014 with 25 billion euros cash

* Also suspends monthly T-bill auctions for rest of year

By Padraic Halpin and Conor Humphries

DUBLIN, Oct 1 (Reuters) - Ireland, set to become the first euro zone country to exit an international bailout this year, has decided not to issue any more bonds this year as it has enough cash on hand, the debt agency said on Tuesday.

The National Treasury Management Agency (NTMA) had planned to tap markets in the final quarter to fully demonstrate the "regular market access" that the European Central Bank says is necessary for its bond-buying programme.

But having raised debt periodically over the last 18 months, including 5 billion euros of new 10-year bonds in March, Dublin has already met its funding needs for 2014 and does not need any more issuance to exit its bailout on schedule.

"In view of its relatively strong funding position, the NTMA has decided to defer consideration of any further medium/long term bond issuance until early 2014," the debt agency said in a statement. It added that it would also suspend monthly treasury bill auctions for the rest of the year.

Ten-year Irish government debt yields were down 6.2 basis points at 3.83 percent on Tuesday, falling in line with other euro zone peripheral debt.

After finding itself locked out of markets three years ago when Ireland was overwhelmed by fiscal and banking crises, the NTMA returned in January 2012 and has built up cash of almost 25 billion euros, even with some bailout funds yet to be drawn.

The yield on benchmark Irish 10-year debt has consistently fallen since then. Its 10-year yield in the secondary market on Tuesday was lower than those of both Spain and Italy and a massive improvement on the 15 percent hit in mid-2011.

Moody's, the last of the three main credit rating firms to class Irish government debt as "junk", upgraded its sovereign rating to stable from negative last week.

"It's been pushed out for fully understandable reasons," Ryan McGrath, a bond dealer at Cantor Fitzgerald, said of the debt-sale plans. "They're in a position where they just don't need the money."

Despite being fully funded through 2014, Dublin must also show it has "regular market access" to be eligible for the ECB's yet-to-be-used Outright Monetary Transactions (OMT) programme for countering investor fears of a euro zone breakup.

"The NTMA are trying to balance their visibility within the market place and their lack of need for funding," said McGrath.

The ECB has not clearly defined what it sees as "regular market access". But Ireland's debt chief said in March it was "as close as it gets" to having the normal access required to access OMT after selling 10-year bonds for the first time in two-and-a-half years.

"I think reading through this, the issuance in Q1 must have fulfilled regular market access," Cantor Fitzgerald's McGrath said. "It just depends on the ECB's interpretation."

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