Asian Buyers Take Almost a Quarter of EU Bond Issuance for Irish Bailout

Investors in Asia piled into bonds sold by the European Union to help finance aid for Ireland, according to EU figures. The notes rose today in their first trading day.

Asian buyers accounted for 21.5 percent of the 5 billion euros ($6.6 billion) of five-year securities, compared with their 4 percent average for EU bond sales since December 2008, the European Commission in Brussels said. Europe represented 71.5 percent -- with the U.K. taking 16.5 percent -- and the Americas 6 percent, the commission, the EU executive arm, reported in an e-mail.

The EU has looked to China over the past year for support in tackling the euro-area debt crisis triggered by Greece, which received a 110 billion-euro rescue in May. Ireland followed in late November with an 85 billion-euro package.

Chinese Vice Commerce Minister Gao Hucheng said yesterday in Madrid that China will buy Spanish public debt in the primary and secondary markets. During a visit to Brussels in early October, Chinese Premier Wen Jiabao said China had acted as a “real friend” to the euro area through “a large quantity” of bond purchases in the past and a policy to “maintain the debt stability in the euro zone.”

The 2.5 percent five-year notes, which were issued by the commission’s European Financial Stabilization Mechanism, climbed 0.48 cent as of 3:18 p.m. today in London to 100.07 cents on the euro, Rabobank prices show. The yield on the notes dropped to 2.49 percent from the issue yield of 2.59 percent. Bond yields move inversely to prices.

Buyers’ Breakdown
Central banks and other “official” institutions represented 38.5 percent of the allocation, while fund managers accounted for 24.5 percent, banks 22 percent and insurance and pension companies 12 percent, according to the commission.

Yesterday’s sale was the first by the EFSM as part of its 22.5 billion-euro share of the Irish rescue. The issue was oversubscribed and sold out in less than an hour, the commission said in a Jan. 5 statement.
“Interest was very strong,” the commission said. “This is a sign of confidence in the euro area.”

The bonds were priced to yield 12 basis points more than the mid-swap rate, the commission said. The interest rate on the loan to Ireland as a result will be 5.51 percent and the funds will be disbursed on Jan. 12, according to the commission.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net