UPDATE 1-Ireland sells 6-, 10-yr bonds; funded to Q2 2011

* 2016 bond’s average yield 4.496 vs 4.521 in June

* 2020 at 5.537 pct vs 4.688 pct in April

* Sale follows Monday’s Moody’s downgrade

(Releads with auction results)

By Marie-Louise Gumuchian and Andras Gergely

DUBLIN, July 20 (BestGrowthStock) – Ireland sold 1.5 billion euros
of bonds as planned on Tuesday, weathering a ratings cut by
Moody’s as it covered its funding needs well into next year,
albeit at high yields.

The National Treasury Management Agency (NTMA) said the
country was fully funded into the second quarter of 2011 after
selling a targeted 750 million euros of paper maturing in 2016
and 750 million of debt due in 2020.

The NTMA almost invariably hits the top of its target range,
but Ireland’s borrowing costs have risen sharply in line with
other peripheral euro zone countries since the debt crisis took

Moody’s cut its credit rating on the country by one notch on
Monday, citing mounting bank rescue costs and weak growth
prospects. [ID:nLDE66I0FY]

In Tuesday’s sale, the average yield for the 2016 bond fell
slightly to 4.496 percent from 4.521 percent from the last
comparable auction in June, shrugging off fresh bad news that
has emerged since then concerning Ireland’s ability to cut its
budget deficit. [ID:nLDE66C0WA]

But the average yield on the benchmark 2020 bond rose to
5.537 percent from the 4.688 percent paid in April.

Analysts said the auction results were strong in light of
the Moody’s downgrade, particularly given bid-to-cover rates of
3.6 and 3.0 respectively, indicating high demand.

“The auction results are quite strong in the context of a
downgrade by Moody’s. I think the fact that there’s strong
demand there will give them a lot of comfort,” Oliver Mangan,
chief bond economist at AIB Global Treasury in Dublin, said.

“The key thing, as we saw last week with Spain that
peripheral countries have no difficulty of funding in markets.”

Recent debt sales in Greece, Spain, Portugal and Italy all
went well, adding to evidence that fears of a sovereign debt
catastrophe are easing. [nLDE66E0QC]

Sales of short-term Greek and Spanish debt on Tuesday both
went relatively smoothly.

The spread of Irish 10-year bonds against their German
equivalent narrowed to 284 basis points after closing at 299
basis points on Monday.
Moody’s, which dropped the rating to Aa2, also changed its
outlook to stable from negative, which helped make much of the
hit to Irish bond markets on Monday short-lived. [ID:LDE66I0FY]

“You could almost read the Moody’s downgrade as positive
because it just removes all of the uncertainty,” Peter Chatwell,
strategist at Credit Agricole in London said.

Ireland does not face any major bond redemptions this year.

NTMA Chief Executive John Corrigan said last week he aimed
to have the 5 billion euro in debt maturing next year already
funded going into 2011. [ID:nLDE66F0LP]

Stock Market Research

(For scenarios on hurdles for the Irish fiscal drive please
click [ID:nLDE66I10Z])

(Writing by Padraic Halpin, Additional reporting by George
Matlock in London; editing by John Stonestreet)

UPDATE 1-Ireland sells 6-, 10-yr bonds; funded to Q2 2011