Ireland Plans Return to Debt Markets for First Time in Two Years

Ireland is set to return to the sovereign debt markets on Thursday. The nation will hold its first debt auction since September 2010. Ireland is currently one of three nations in the Troika's bailout program.

In 2008, Ireland's six largest banks lost over $125 billion due to souring property loans. As the nation's largest banks were set to go bankrupt, the Irish government guaranteed the banks' debts, effectively nationalizing them. This put a strain on the fiscal health of Ireland, forcing it into a bailout program.

The Irish 9-year bond yield traded near 6.23 percent on Tuesday, down from the high seen on July 18, 2011 of 15.51 percent. Ireland has been praised by the European Union and other creditors for making large steps towards returning to fiscal health. A report from the Troika in November 2011 pointed to Ireland's first debt sale in the second half of 2012.

Tuesday, Ireland announced that it is set to sell approximately $630 million dollars in 3-month bills. The auction is set for Thursday, July 5, the same day that the European Central Bank is expected to cut rates in order to spur a fledgling European economy. Economists are predicting that the central bank will cut its benchmark lending rate to 0.75 percent from 1.0 percent.

Since the crisis forced Ireland into a Troika bailout in 2010, its government was forced out and a new one has formed. Some have said that Ireland is the ideal road map for Greece, where an internal devaluation causes exports to eventually become more competitive. The ensuing export growth has fueled Ireland's economy and subsequent recovery, however, a continued slowdown in continental Europe poses a headwind to Irish economic growth.

The Irish ISEQ Benchmark Index closed higher on the news, rallying almost 0.3 percent to 3,170.68. At its peak in 2007, the index reached highs well over 14,000. The financial sub-index, consisting of five of Ireland's biggest financial institutions, fell 0.7 percent. Traders looking for exposure to Ireland's stock market can do so through ETF's such as the iShares MSCI Ireland ETF EIRL. Traders should note that this ETF is almost 25 percent concentrated in materials company CRH CRH.