Business Irish

Friday 20 October 2017

NTMA borrows €4bn in 20-year bond

The deal boosts the supply of bonds eligible to be bought under the ECB’s QE scheme
The deal boosts the supply of bonds eligible to be bought under the ECB’s QE scheme
Donal O'Donovan

Donal O'Donovan

The State has raised €4bn for 20 years in the first bond deal of the year. The money has been borrowed at an interest rate of 1.72pc per year.

The new 20-year syndicated bond deal attracted investor bids totalling €10.75bn. While most of the cash was left on the table, the final amount borrowed is double the original target.

The National Treasury Management Agency (NTMA) mandated Barclays, Cantor Fitzgerald, Danske Bank, HSBC, JP Morgan and Morgan Stanley as "joint lead managers" to manage the sale of the new bonds. In traditional government bond auctions the debt is issued, or sold, to investors through primary dealers.

In a syndicated bond the debt is underwritten by a group of banks, who then, in effect, sell on the risk to investors.

A 20-year bond deal remains relatively unusual - most lenders want to be repaid sooner - but long-term deals are becoming more common, partly because returns are relatively higher.

The Government has taken advantage of record low funding rates over the last two years to issue longer-dated debt at an increasingly lower cost, stretching the maturity of its stock of debt by selling 15-year, 30-year and even a small amount of 100-year bonds. This is the fourth year in a row the Government has borrowed on the markets in the first week of January.

The new deal boosts the supply of bonds eligible to be bought under the European Central Bank (ECB) quantitative easing scheme. The ECB last month cut its purchases of Irish bonds short of the level its rules dictate, data showed on Tuesday, in part because it was approaching a quota that caps the total amount it can hold of any one country's debt.

The NTMA has said it plans to borrow €9bn to €13bn in total on the markets this year.

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