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Ireland’s bailout exit feted by bond markets

Ireland's first bond auction since it began to exit its bailout by international creditors in December went with a bang on Tuesday.

There was believed to be between 11-13 billion euros ($15-17.7 billion) worth of orders for the auction, two sources in Dublin told CNBC. While the Irish government had planned to sell 3-3.5 billion euros of 10-year debt, this may be raised to close to 5 billion euros after greater-than-expected demand at the bond sale.

Photographer | Collection | Getty Images

"Any lingering concerns that people had about Ireland's exit without a promissory credit line will have been abated by the strong market reaction," Philip O'Sullivan, chief economist at Investec Ireland, told CNBC.

Ireland's benchmark 10-year bond yield – a measure of the cost to the country of repaying its debt - fell to 3.34 percent following the auction, compared with nearly 15 percent at the height of the country's debt crisis.

(Read more: Ireland exits bailout: Mission not quite accomplished)

There had been some concerns about the country leaving its 85 billion euro ($114 billion) bailout without a backstop of extra credit support from its international lenders – although it is still under the supervision of the International Monetary Fund (IMF). It made several successful forays into the bond markets last year, but this is the first since it exited the bailout.

(Read more: Why the euro zone bond rally may be ending)

Most of the investors are likely to come from outside the country, according to O'Sullivan. This is important as there areconcerns in other peripheral euro zone countries about a credit "death spiral" fueled by cheap loans from theEuropean Central Bank (ECB), where domestic banks prop uptheir countries' economies by borrowing and buying up their owncountries' debt – whichdrives down the cost of repaying that debt for the country.

- By CNBC's Catherine Boyle. Twitter: @cboylecnbc.

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