Saturday 22 July 2017

NTMA eyes sale of longer-term bonds after €1.5bn raised

Agency wants to extend debt maturity when markets settle

Emmet Oliver

The NTMA, the Government's treasury arm, wants to issue more longer-term debt later this year if the European bond markets settle down.

Yesterday, the agency successfully raised €1.5bn in fresh funding at its latest auction. The two bonds will mature over four and 10 years respectively.

The director of the agency Oliver Whelan said the average maturity for debt held by Ireland was about six years and it was a priority to bring this down by issuing debt maturing over 15 years, or even longer.

Asked could the NTMA issue 15-year debt or more at the present time, Mr Whelan said the agency would "rather wait and see''. At times of budgetary pressures, countries try to stretch out the average maturity of their debt as much as possible.

For example, the UK treasury agency has managed to issue British debt with an average maturity of 13.7 years, while France has an average maturity of 6.9 years. Equally the average debt maturity of US treasury bonds is 4.8 years.

Maturities

Countries with short-term maturities are more likely to run into funding problems.

The NTMA has now raised 66pc of its funding requirement this year with another bond auction scheduled for June 15. Whelan said once the European Commission and the IMF announced a plan to deal with the eurozone debt crisis, almost a fortnight ago, the markets had settled and bond yields had tumbled sharply.

He said the agency had never contemplated cancelling its monthly auction. He said demand remained dependable and yesterday there was 3.1 times the level of demand compared to the debt available.

Asked could he envisage the NTMA skipping one of its auctions, Mr Whelan said only if the market became "very dysfunctional''.

The 2014 bond was sold at an average yield of 3.11pc while the 2020 bond was sold at an average yield of 4.72pc, he said. The NTMA has raised €13.2bn so far this year.

Meanwhile, Greek 10-year government bonds rose, snapping a three-day decline, after the European Union lent the country €14.5bn assuaging concern it won't be able to pay back investors.

The gain sent the yield down by the most in a week as the first transfer of funds allowed Greece to repay €8.5bn of bonds due tomorrow.

European finance ministers said Greece's debt crisis won't lead to a continent-wide austerity drive that may tip the economy back into recession.

Spain's 10-year bond yields stayed near the highest in a week as its borrowing costs rose at a sale of 12 and 18-month bills.

Irish Independent

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