Tuesday 17 January 2017

Bond deal tipped to be last of 2016

Published 04/11/2016 | 02:30

Michael Noonan
Michael Noonan

The State borrowed €750m on the markets yesterday, paying an interest rate of less than 1pc a year for bonds due to be repaid in 2030.

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Minister for Finance Michael Noonan said the €1.9bn bid at an auction for the bonds showed investors' appetite for Irish debt remain high.

"I very much welcome this sale of €750m in government bonds at a yield of 0.978pc. The cover of 2.6 times demonstrates that investor interest was very strong," Mr Noonan said.

"Today's successful bond sale yet again represents Ireland's continuing growth and demonstrates confidence in Ireland among the global markets," he added.

The National Treasury Management Agency (NTMA) has now raised €8.25bn of a target range of €6bn to €10bn for the year. Activity in the bond market tends to slow dramatically towards year end.

"After the completion of Thursday's auction, it is likely it will be early January 2017 before the NTMA returns to the market," said Ryan McGrath, a bond market trader at Cantor Fitzgerald in Dublin.

Next year's target for debt issuance is likely to be similar to this year's - in the €8bn to €10bn range, he said.

Despite some lift in bond yields in recent weeks, new borrowing costs for the State remain at historically low rates as a result of mass bond-buying by the European Central Bank, which has been purchasing around €1bn of Irish government debt a month to meet its self-imposed quantitative easing targets.

Elsewhere in bond markets, US Treasury prices dipped, with long-dated bonds underperforming, after the Bank of England scrapped plans to cut interest rates and indicated that inflation is likely to rise further.

The BoE ramped up its forecasts for growth and predicted that inflation would jump to 2.7pc this time next year, nearly triple its current level.

Irish Independent

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