Tuesday 17 October 2017

Ireland sells €4bn of bonds at negative yield

The NTMA borrowed €4bn for five years, tapping the markets at a negative yield for the first time in a so-called syndicated bond. Photo: Reuters
The NTMA borrowed €4bn for five years, tapping the markets at a negative yield for the first time in a so-called syndicated bond. Photo: Reuters

The NTMA borrowed €4bn for five years, tapping the markets at a negative yield for the first time in a so-called syndicated bond.

The yield of -0.008pc means investors are effectively prepared to lose money in real terms to lend to Ireland, something that has become common as the ECB has flooded the bond market with cash in a bid to stimulate riskier lending.

Orders exceeded €10.1bn, underscoring the strong demand for Irish paper.

The bonds are to help repay early €5.5bn of IMF and Danish and Swedish bailout loans. The deal was managed by BNP Paribas, Citigroup, Davy, Goldman Sachs, NatWest and Societe Generale.

The deal adds to the total volume of outstanding Irish government bonds. Under the ECB's QE protocol that means the Central Bank can buy up even more Irish debt.

The volume of Irish bonds purchased by the ECB increased to €577m in September from €488m in August, Cantor Fitzgerald's Ryan McGrath said yesterday.

Global stock markets hit a record high on Wednesday, with investors in exuberant mood in the United States overnight and in Asia later - but sentiment in Europe was soured by a political crisis gathering steam in Spain.

Ireland borrowed at near-record lows despite the impact on financial markets of tensions between Madrid and Catalonia since the independence referendum on Sunday that was tarnished by police violence.

Fallout from those clashes nudged Spanish stocks towards their biggest daily fall in more than a year on Wednesday, in turn dragging down other European bourses.

"If you look at the European markets, the continued political worries in Spain is the main driver, and that uncertainty seems likely to continue if the regional government declares independence," Investec economist Ryan Djajasaputra said.

While world stocks hit a fresh record high, the pan-European STOXX 600 index was down 0.2pc while Spain's IBEX fell as much as 2pc, its biggest daily fall since August last year.

Catalonia-headquartered Banco Sabadell led the IBEX lower, falling 4.7pc.

Spanish banks weighed on the eurozone banking index, down 1.6pc and on track for its worst fall in weeks with all stocks in the red.

"The under-performance is across asset classes as well - Spanish bonds are also under-performing," Djajasaputra said.

Spain's government bond yields rose to their highest since March n Wednesday, stretching the gap over German peers to its widest in five months.

The mood in Europe is at odds with the picture in other parts of the world.

Earlier, Japanese and Hong Kong shares led Asian stocks higher, supported by optimism about global growth and optimism about Chinese growth. (Additional reporting Reuters)

Indo Business

Also in Business