Ireland wins vote of confidence as bond issue oversubscribed

The Republic of Ireland saw its €1.5bn (£1.3bn) bond issue snapped up at auction today, pointing to investor confidence in the strength of the economy.

Its four-year bonds were oversubscribed around five times, while eight-year bonds were three times oversubscribed.

The National Treasury Management Agency (NTMA) says the Government met its target, raising €1bn from the eight-year bonds paying 4.5% interest, and €500m from the four-year bonds, paying 4%.

Ireland has been plagued by rumours it will have to approach the International Monetary Fund or the European Union for financial assistance as it struggles to keep its banking sector afloat and deal with its budget deficit.

At a banking conference in Dublin yesterday Patrick Honohan, the central bank governor, described fears over the nation's finances as "alarmist" and emphasised the Government is addressing the deficit.

Analysts have suggested it could hit as much as 25% of GDP this year.

Honohan says if the economy stayed on the track initially envisaged, the deficit could shrink to around 3% by 2014. However, Honohan admitted other factors could hinder this progress.

"As the IMF and others have noted, the real economy, the price level and interest rates on Government borrowing have evolved in a less favourable way. Servicing of the additional debt related to bank restructuring is also a negative factor," he says.

Last month ratings agency Standard & Poor's downgraded Ireland's credit rating one step to AA- and assigned it a negative outlook on concerns about the costs of bailing out its fragile banking sector.