* Ireland draws bumper demand for first post-bailout bond
* Irish 10-year yields fall to eight-year lows
* Sale boosts appetite for other lower-rated debt
By Ana Nicolaci da Costa and Marius Zaharia
LONDON, Jan 7 Ireland's 10-year government bond
yields plunged to eight-year lows on Tuesday as the country's
first debt sale since it exited an international bailout
attracted bumper demand.
Investors bid more than 14 billion euros ($19 billion) for
the new 10-year bond sold via syndication, nearly four times the
size of the final 3.75 billion euro issue, the country's debt
Analysts said the deal was final confirmation that investors
trusted Ireland to recover unaided from its property market
crash, having just come through an 85 billion-euro EU/IMF
bailout programme undertaken in 2010.
The deal also boosted demand for lower-rated debt at large,
which had already been benefiting this year from improved
economic data, particularly from Spain.
"Certainly Ireland has a lot to do with it. It was a
blow-out deal," said David Keeble, global head of fixed income
strategy at Credit Agricole. "People are picking their trade for
the year and deciding that periphery is a good buy because of
improved economic data."
Irish 10-year bond yields fell to 3.27 percent,
their lowest in eight years, according to Reuters historical
data. That brought the premium they offered over German Bunds,
the euro zone benchmark, to 137 bps, its lowest since April
2010. The spread over UK gilts fell to 30 bps, the tightest
since March 2010.
Other periphery bonds issues followed suit. Ten-year Greek
yields fell nearly 40 bps to their lowest since
June 2010 at 7.83 percent. Portuguese yields
dropped 16 bps to 5.42 percent - the lowest since May 2013.
Ten-year Spanish yields fell more than 10 bps
to their lowest since December 2009 at 3.798 percent. Equivalent
Italian yields were down 5 bps at 3.88 percent.
Spanish government bonds have had a good run so far this
year due to better economic data from the euro zone's fourth-
largest economy. Traders said there was also speculation in the
market that Spain would undertake a road show next week for a
10-year bond syndicated deal.
"There is very solid domestic buying of Spain and Italy
again. I think people are looking for a bit of yield and that's
where it is," one trader said.
Some analysts also said the Irish deal offered proof of
increased market access and should help support Ireland's credit
ratings. Moody's, the only big agency to rate Ireland below
investment grade, is due to review its ratings on Jan. 17.
PORTUGAL MAY BENEFIT
Rabobank senior rate strategist Richard McGuire said
evidence a euro zone country was able to successfully exit its
bailout could raise confidence that Portugal could follow in
Ireland's footsteps when its aid deal ends later in 2014.
Portuguese bonds have outperformed other euro zone debt this
year. Ten-year yields fell more than half a point
to 5.42 percent since the end of 2013 as an improving global
growth outlook increased appetite for riskier assets.
"I would expect Portugal to tap the market in coming weeks,"
DZ Bank strategist Christian Lenk said.
Junk-rated Portugal is due to be reviewed by Moody's this
Friday and by Standard& Poor's a week later. Analysts expect the
ratings at least to remain stable.
"Ratings are bottoming out," KBC strategist Piet Lammens
said. "There is a general idea in the market that the European
crisis is almost over."
Top-rated German Bund yields were 2 bps lower
at 1.89 percent.