Thursday 21 September 2017

NTMA fills up on debt ahead of French presidential vote

There will be a presidential election in France next month
There will be a presidential election in France next month

Gretchen Friemann

The National Treasury Management Agency (NTMA) borrowed €1.25bn from the debt markets yesterday, marking its second dual-tranche bond issuance of the year.

The deal deepened expectations that the NTMA will hit its maximum bond issuance target of €13bn by the end of the year as it hoards cash ahead of a slew of Irish bond redemption payments which fall due over the next three years.

The State's debt management agency has already raised half that figure after the latest sale of €850m of benchmark ten year bonds at a yield of 1.046pc, along with an additional €400m of state-backed loans at a yield of 2.187pc.

While NTMA typically issues a greater volume of debt in the first half of the year, mounting uncertainty over the European political landscape may have contributed to the decision to borrow €6.5bn in the first quarter.

According to Ryan McGrath, a senior analyst at Cantor Fitzgerald Ireland, the risk of an adverse outcome from next month's French presidential election, inset, is likely to have influenced the timing of yesterday's bond sale.

Mr McGrath argued that NTMA can now approach the markets more "opportunistically" through the rest of the year.

He also pointed out the decision to borrow a larger amount than originally planned partly stemmed from looming redemption commitments.

The State must repay €14bn of Irish bonds in 2019 while a further €19bn falls due in 2020.

That means the amount the State has to borrow on the markets will rise, even though the requirement for new debt has fallen as the national finances have improved.

Last year NTMA set its bond issuance target at €6bn to €10bn but adjusted that range upwards this year to €9bn to €13bn.

Investor appetite for the dual-tranche sale focused largely on the 10-year note with demand for the bonds stemming primarily from European institutions. NTMA's latest bond issuance came on the same day as the euro strengthened after Mario Draghi played down concerns about deflation risks.

Irish Independent

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