* Ten-year issue about three times oversubscribed
* European peripheral yields tighten
* Sets seal on Ireland's completion of EU/IMF bailout
By Conor Humphries and John Geddie
DUBLIN/LONDON, Jan 7 (Reuters/IFR) - Ireland made a stormingreturn to the international bond market on Tuesday, with bumperdemand for the country's first debt sale since exiting itsEU/IMF bailout helping to drive down yields across the eurozone's periphery.
Investors bid more than 14 billion euros ($19 billion) forthe new 10-year bond sold via syndication, nearly four times thesize of the final 3.75 billion euro issue, the country's NTMAdebt agency said.
The bond - the first Dublin has sold since last March - waspriced at mid-swaps plus 140 basis points, giving a yield ofjust over 3.5 percent, and marked a substantial step towards atarget of raising 6-10 billion euros this year.
"This sale shows that Ireland has fully exited the EU/IMF(bailout)," Finance Minister Michael Noonan said in a statement.
"The yield of 3.54 percent illustrates the strength ofIreland's international reputation and brings us far closer tothe borrowing rates of the strongest European economies."
Ireland's cost of borrowing over 10 years has tumbled from apeak of about 15 percent, hit in 2011 as the euro zone's debtcrisis intensified.
A test of market confidence in Ireland's recovering economy,which grew 1.7 percent year on year in the three months toSeptember, the sale also sets a benchmark for Greece, Portugaland Cyprus, the euro zone states still under sovereign bailoutprogrammes.
"Such extremely heavy demand reinforces the recent positivesentiment towards Ireland," said Ryan McGrath, a Dublin-basedbond dealer with Cantor Fitzgerald. "This bodes well forupcoming issuance by other euro zone peripheral countries."
Yields on Spain's 10-year benchmark bond fell nearly 10basis points to 3.81 percent, while their Greek equivalent fellby 37 basis points.
"The deal has attracted a lot of international interest, andwith many of those orders unable to be filled, these investorshave had to look elsewhere," said Dan Shane, head of SSAsyndicate at Morgan Stanley, one of the banks leading the deal.
Smaller euro zone states sometimes place bonds via asyndicate of banks as doing so helps them to reach a broaderrange of investors than through a traditional auction.
Ireland formally exited its 85 billion euro bailout on Dec.15, having sought the rescue in 2010 after a burst propertybubble crippled the country's banks and blew a hole in thepublic finances.
Dublin is already funded into 2015, but the debt agency hassaid it wants to resume regular bond auctions to demonstrate areturn to "business as usual" and to insure itself againstpossible future market turbulence.
Irish debt rallied in the secondary market, with the yieldon its benchmark 10-year bond plunging 10 basispoints to an eight-year low of 3.27 percent. Five-year yieldsfell to within 4 bps of equivalent UK gilts, a premium that has shrunk from 225 bps a year ago and 1,600 at the height of thecrisis.
The high demand comes as Ireland's economy shows signs it ispicking up steam, with the jobless rate falling to 12.5 percentfrom a 2012 peak of 15.1 percent and the government expectingGDP growth of 2 percent this year.
Nevertheless, some investors have expressed concerned aboutits national debt, which at 124 percent of GDP remains among thehighest in the European Union.
The NTMA said Tuesday's issue drew interest from over 400fund managers, pension funds and other investors, including somefrom the Middle East and Asia.
Barclays, Citi Bank, Danske Bank,Deutsche Bank, Morgan Stanley and DavyStockbrokers were joint lead managers on the sale.
Barclays (BARC)