Mmm, Irish yield stew | FT Alphaville

Mmm, Irish yield stew

Take on more bank bailout risk than you planned for.

Get kicked around by a rating agency.

Then kick back at the rating agency.

Watch spreads on your bonds widen to new records.

Pass Go and collect a bumper bid-to-cover ratio on your next bill issue. Or that seems to be the recipe according to Ireland’s latest debt auction:

The National Treasury Management Agency (NTMA) held an auction of Irish Treasury Bills on Thursday 26th August 2010. Two Treasury Bill lines were offered in the auction with maturities of six months and eight months and a target issuance range of €400 million to €600 million.

Total bids were received for €3.7 billion (bid-to-cover ratio 6.1 times) and it was decided to issue a total of €600 million; €200 million of 6 month Bills and €400 million of 8 month Bills.

The weighted average annual interest rate and bid-to-cover ratio were as follows:

Nice — 10.1 times cover on the six-month issue.

Confused? Don’t be. First, as Lorcan points out, fewer than half as many six-month bills were sold as usual, which would help the cover.

Second — this might also be an example of yield-hunting in a world where growth or the absence thereof is the main concern; not so much the exact balance of risks and return in Europe’s sovereign debt crisis. Not just yet.

After all, it’s a six-month T-bill, not a ten-year Irish government bond — that, you could probably switch into a bund — so it’s well within the EFSF guarantee window.

And to think Ambrose wants the Irish to riot…

Related link:
The Big Pfffft and the Euro-peripherals – FT Alphaville