Business Irish

Sunday 24 September 2017

Greek crisis fails to dent demand for Irish bonds

42pc of State’s borrowing needs met as €1.5bn raised

Greece cars
Greece cars

Emmet Oliver

CONCERNS over the sustainability of the Greek economy failed to dent demand for €1.5bn of Irish bonds issued yesterday by the National Treasury Management Agency (NTMA), which has now raised 42pc of the State’s borrowing needs.

The debt agency said it had not seen “any negative impact’’ from concerns over the scale of the deficit in Greece and the two bonds were two-and-a-half times over-subscribed.

The next auction is scheduled to take place just before St Patrick’s Day. The NTMA said it could yet launch a 15-year bond in a bid to stretch Ireland’s maturities out.

Oliver Whelan, head of funding and debt management at the NTMA, said the market was clearly distinguishing between Ireland and Greece. That seems to be borne out by current benchmark bond prices.

Yesterday, 10-year Greek debt was yielding 6.4pc, compared with Irish paper at 4.7pc. German bunds, the European benchmark, were yielding 3.2pc, leaving the Greek spread against German bunds at 3.2pc, one of the widest spreads in the history of the eurozone.

Maturing

The NTMA offered two bonds to the market: a 4pc bond maturing in 2014 and a 4.5pc bond maturing in 2020. The 2014 bond attracted 2.8 times demand level, known as bid-to-cover ratio. The longer dated bond attracted 2.3 times bid-to-cover ratio.

The NTMA has now raised €8.4bn of the €20bn the Department of Finance has instructed it to raise. This amount does not take account of any monies which may be needed to capitalise any of the banks.

The NTMA managed to raise some 2010 funds at the end of 2009. It also has what it calls “cash balances” on hand, although in reality this money is short-term commercial paper.

While Irish politicians are starting to advise Greece on how to cut its deficit, last year Ireland found its own 10-year government bonds edging past 6pc, a sign of significant market concern about a sovereign’s health.

Due to cuts by Finance Minister Brian Lenihan, Ireland’s bond spreads have narrowed considerably.

The bid-to-cover ratio is seen as a vital indicator of market confidence, effectively telling treasury managers how much demand there is for the bonds they are issuing.

The NTMA was faced with a lowly bid-to-cover ratio of just 1.1 times last April when it issued a nine-year bond into a hostile market.

By far the biggest subscribers for Irish bonds were from Britain, who took up 38.5pc of the last issue, which took place in January.

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