Ireland returns to international bond market Dublin has taken advantage of growing investor confidence in Ireland by returning to the international bond market for the first time since September 2010 to swap €3.52bn in government bonds. The transaction is part of a government strategy to reduce its significant funding requirements in January 2014 - the month after it hopes to exit its bail out programme with the European Union and International Monetary Fund. Almost a third of investors in an €11.8bn treasury bond offering a yield of 4.9 per cent and due to mature in January 2014 took up an offer on Wednesday to swap their holdings to a new bond offering a yield of 5.15 per cent. This new bond will mature in February 2015. "The decision to undertake this now reflects substantial demand among investors for our short-dated paper and the resulting decline in yields on Irish paper recently," said Ireland's National Treasury Management Agency. The agency expects to continue to tap the bond markets in the months ahead as Ireland prepares for an exit from its EU-IMF programme at the end of 2013. Dublin has been locked out of international debt markets since a property crash and banking crisis forced it to accept an €67.5bn EU-IMF bail out in November 2010. But Ireland's return to economic growth in 2011, its ability to meet its deficit reduction targets and continued political stability have impressed investors. This week yields on five year Irish bonds fell below 6 per cent for the first time since the bail out by international lenders. In early January 2012 the yield was 8 per cent while in July last year the yield was 18 per cent. "The big thing is that sentiment towards Ireland has shifted since independent bank stress tests were conducted last year and Bank of Ireland was able to raise private capital in the summer of 2011," said Dermot O'Leary, economist with Goodbody Stockbrokers, He said Ireland had also managed to differentiate itself from Greece by consistently meeting all its bail out targets. "International investors have taken the view Ireland has the best chance of emerging from the economic crisis," said Mr O'Leary. Michael Cummins, an executive at Dublin-based financial services firm Glas Securities, said yields on Irish bonds had fallen sharply since the European Central Bank's three year longer-term refinancing operation, which saw eurozone banks borrow almost euro 500bn last month. "The Irish banks have been active in the market for Irish bonds and the recent drop in yields has been largely driven by domestic demand," he said. Mr Cummins said the bond swap was a move by the debt agency to relieve fears Ireland would not be able to meet its €23bn funding requirements in 2014 when it had exited the EU-IMF bail out. Michael Noonan, Ireland's minister for finance, said the bond swap was first step in Ireland getting back into the market. "If we look forward at the capacity of Ireland to repay its debts, there is a kind of cliff hanging over us in January of 2014," he said. Dublin still faces challenges in meeting its EU-IMF bail out targets due to the ongoing eurozone debt crisis and a slow down in growth. Last week the EU-IMF cut its 2012 growth forecast for Ireland to 0.5 per cent, down from the 1 per cent it forecast last October