* Issuance marks landmark in Ireland's bid to exit bailout
* Offers of 12 bln euros an "extraordinary" response-fin min
* Tough times still ahead for struggling domestic economy
By Stephen Mangan and Conor Humphries
DUBLIN, March 13 Ireland took its biggest step
yet towards exiting its European bailout later this year by
selling 5 billion euros ($6.5 billion) of new benchmark 10-year
bonds on Wednesday to meet nearly all its funding needs through
Rescued two-and-a-half years ago after being overwhelmed by
fiscal and banking crises, Ireland has hit every major target
since and has been held up by euro zone leaders as the success
story their austere plans desperately need.
The government hailed the sale as proof that Ireland can
soon end its dependence on 85 billion euros in rescue loans it
received from the European Union and International Monetary
Fund. It has been helped by a fall in yields for its debt, now
lower than those of Spain or Italy, euro zone countries that,
though troubled, have not been driven to sovereign bailouts.
"There has been an extraordinary response to it and I don't
think you will have heard me use the word extraordinary before,"
Finance Minister Michael Noonan told a news conference after the
"This brings us within about a billion and a half towards
what we need to the end of 2014. That puts us in a very strong
position. A lot of ministers visiting various countries for
Patrick's Day will have a fairly impressive piece of news."
The sale was Dublin's biggest market test to date after
resuming borrowing last year, and raised as much as double the
amount that many traders had predicted would be offered.
Even then, it was highly over-subscribed, with offers of 13
billion euros, the National Treasury Management Agency (NTMA)
The much anticipated issue was Ireland's first sale of such
long term debt since it was locked out of markets in late 2010.
The yield on the new debt was 4.15 percent compared to 4.7
percent in Italy and 4.8 percent in Spain.
Ireland's current benchmark 2020 bond yields 3.7 percent in
secondary markets, a huge improvement from the 15 percent it
yielded at the height of the euro zone crisis in mid-2011.
Ireland currently pays an average of 3.5 percent for funding
from its rescue fund.
Wednesday's deal also moves Dublin closer to qualifying for
the European Central Bank's new OMT bond-buying scheme, which
requires a country to have secured "normal market access".
"I think that should be regarded as a resumption of normal
access to the markets .. that's our judgment," NTMA chief
executive John Corrigan told a conference call.
The OMT scheme is not an immediate priority for the
government, he added, with the focus rather the securing of a
conditional line of credit from the International Monetary Fund.
The bond issue could also convince Moody's, the only rating
agency that ranks Ireland's debt as 'junk', to at least change
its outlook to stable. Moody's described the deal as a credit
positive step in Ireland's efforts to regain market access.
"Either the market is wrong or Moody's is wrong and I'm
betting with the market," Corrigan said.
Together with the sale of 2.5 billion euros of five-year
debt in January and the 1.3 billion recouped last month from
selling a state-rescued insurer, Ireland is now very close to
the 10 billion euros it has targeted to raise this year and any
additional fundraising will be very light, Corrigan said.
But while the deal underlines the confidence investors have
in the Irish government, it will offer little relief to
taxpayers who face at least three more years of austerity to
meet strict European Union-enforced deficit targets.
Although Ireland has avoided joining the rest of the euro
zone in recession and expects robust exports to deliver a third
year of tepid economic growth in 2013, the domestic economy
continues to struggle under the weight of relentless austerity.
Unemployment, while stabilising, remains above 14 percent
with over half of those out of work for a year or more. The
jobless rate would have hit 20 percent had emigration not risen
four-fold from the "Celtic Tiger" boom years of the 2000s.
Ireland's almost wholly state-owned banks, pushed to the
brink when a property bubble spectacularly burst in 2008, are
only slowly recovering. The government unveiled a new plan on
Wednesday calling for more action on their most troubled area of
"This issue continues the run of good news, but there are
still many delicate steps to be taken before Ireland returns to
economic health," said Austin Hughes, chief economist with KBC
"It shows there is positive sentiment in financial markets,
but the second and arguably more important element is to gently
encourage a rebound in economic activity."