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Dublin government raises €5bn in a stunning bond markets return

The Irish Government has raised over €5bn (£4bn) in the bond markets in a spectacular return to the markets after a two-year drought.

The National Treasury Management Agency raised over €4bn (£3.2bn) of new bonds and convinced more international investors to swap bonds due to be paid in the next two years for longer term loans.

Investors committed a total of €5.23bn into longer-dated bonds maturing in 2017 and 2020.

The Irish state paid interest of 5.9% to borrow for five years and 6.1% to borrow for eight years.

It's more than is paid under the terms of the bailout, but the higher interest was needed to tempt investors back after a two year absence.

The fund-raising came as yields on Spanish and Italian bonds are increasing with the cost of borrowing for Spain up over 7%.

In addition, funding from the EU/IMF/ECB troika is scheduled to end for Ireland next year.

NTMA Chief Executive John Corrigan welcomed the fund raising.

"We are very pleased with the success of today's transaction, particularly the fact that investors committed more than €4bn of new money to our first long-term issuance since September 2010.

"This marks a very significant step for Ireland on the way to full bond market access. As a result of the transaction, the NTMA has now covered a significant proportion of the €8.2bn bond maturing in January 2014 which up until now has been seen as a challenging 'funding cliff."

Taoiseach Enda Kenny said it was particularly notable that the new bonds were long-term.

"It's a measure of the progress we are making in emerging from the programme that we are in and it's particularly important that these are long term papers that are involved here," he said.

The Republic's Minister for Finance Michael Noonan said the move, which surprised market watchers and analysts, was no surprise to him.

"There were a lot of experts who said we couldn't do it," he said.

The auction took place yesterday in the first such move since September 2010.