A warm reception in a cold climate for sovereign debt: Iceland's first international bond offering since its spectacular economic and banking collapse late in 2008 has been snapped up by investors.

The five-year $1bn deal, yielding just under 5%, is a milestone in rebuilding confidence internationally and follows a turnaround in the economy, forecast to grow 2.25% this year. It will also fuel debate over whether peripheral European countries such as Greece, Ireland and Portugal would have fared better if they had had their own currencies and let their banks go bust.