Business Irish

Sunday 24 September 2017

NCB forecast bailout loan from EU/IMF to cost 5 - 6pc

Borrowings are set to extend over three and five years with rates in line with the Greek programme, experts say

Portuguese Prime Minister Jose Socrates, centre, gives a thumbs up next to Finance Minister Fernando Teixeira dos Santos, right, after the final approval of his government's 2011 state Budget on Friday. Photo: AP
Portuguese Prime Minister Jose Socrates, centre, gives a thumbs up next to Finance Minister Fernando Teixeira dos Santos, right, after the final approval of his government's 2011 state Budget on Friday. Photo: AP

Emmet Oliver Deputy Business Editor

IRELAND is likely to borrow from the EU/IMF at an interest rate of between 5.2pc and 5.8pc, with loans extending over three and five years, NCB Stockbrokers has predicted.

The broker said the wording of the European stabilisation fund was "unhelpful'', but it appeared that rates of 5.23pc for three-year money and 5.85pc for five-year money were likely.

"In line with the experience under the Greek programme, loans and bonds are envisaged to have an average maturity of three to five years,'' said the broker.

"There has been much talk of what interest rate the European Stabilisation Fund will charge Ireland for loans disbursed from the facility.

"The confusion stems from the unhelpful wording of the framework agreement,'' said NCB.

While any rate over 5pc is likely to be difficult for Ireland to live with, NCB said it was worth noting that Ireland is facing bond yields of 8.1pc in the market.

"The other consideration is the profile of Irish debt maturing over the next 3 to 5 years. The glaring point is that Ireland has virtually no debt maturing in 2015 and none in 2017.

Given the large amount of money that needs to be borrowed over the next number of years other areas of the curve will also have to be filled,'' said the broker.

"With the 3 to 5 year criteria in mind and Ireland's debt profile, it seems likely that loans will be concentrated in the 2013 to 2018 period over the life of any agreement,'' said NCB.

Meanwhile, governments elsewhere in Europe pushed back against speculation they may next be in line for a bailout. The cost of insuring Portuguese, Irish and Spanish government debt against default yesterday rose to records based on closing prices.

Portugal's government denied a report in the 'Financial Times' Deutschland that it's being forced to seek aid as well.

The country's parliament yesterday approved the government's budget for 2011 and four people with knowledge of the transactions said the European Central Bank bought its bonds.

European Commission President Jose Barroso said in Paris yesterday that "it's completely wrong" to suggest the commission has lobbied Portugal. The German government "isn't pressing anybody to seek funding," Steffen Seibert, Chancellor Angela Merkel's chief spokesman, told reporters in Berlin.

"There are those who think that the best way to preserve the stability of the euro is to push and force the countries that at this moment have been more under the floodlight to that aid," Portuguese Finance Minister Fernando Teixeira dos Santos said in interview published yesterday.

"But that is not the vision or the political option of the countries that are involved."

Spanish Prime Minister Jose Luis Zapatero told Catalan radio RAC1 that investors who are "short" on Spain "are going to be wrong and will go against their own interests."

Finance Minister Elena Salgado said that Spain will issue less debt at the remaining auctions of 2010 because the nation's financing needs for this year are already covered.

Irish Independent

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