Sunday 22 October 2017

NTMA cancels €500m of bonds linked to Anglo liquidation

The Central Bank in Dublin
The Central Bank in Dublin
Donal O'Donovan

Donal O'Donovan

the NTMA has cancelled €500m of bonds linked to the liquidation of the former Anglo Irish Bank after buying them from the Central Bank.

The bonds were issued in 2013 as part of the liquidation of the Irish Bank Resolution Corporation (IBRC).

That complex deal saw the Central Bank acquire €25.03bn of eight long-dated so-called Floating Rate Notes (FRNs), and €3.461bn of the Irish Government 2025 Fixed Rate Bond, which was due to mature in March 2025.

The NTMA has been buying the FRNs in batches of €500m from the Central Bank in order to tear them up.

If the bonds went to another owner the interest would have to be paid, in the case of the latest bond purchased, until 2043.

Controversially, the Central Bank destroys the money it receives from the State when the purchases happen as part of its management of the amount of money in circulation. In 2016, the NTMA bought back €3bn of the bonds. At the same time it borrowed €8.25bn on the markets.

The Central Bank originally received the bonds as part of the liquidation of the IBRC in February 2013 - the so-called 'Prom Night'.

The Central Bank's stock of the notorious promissory notes used to bail out the scandal-hit bank were cancelled and exchanged for standard government bonds issued through the NTMA.

But the Central Bank had to agree a disposal schedule because it is not allowed to lend to the State.

The total stock of the bonds held by the Central Bank is now just over €19.3bn. That is in addition to €19.1bn of Irish sovereign bonds bought by the ECB under its so-called quantitative easing (QE) programme.

Irish Independent

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