NTMA plans to raise up to €1.25bn this week
The National Treasury Management Agency will sell up to €1.25bn of bonds on Wednesday, taking the state close to the lower end of its borrowing range for 2017.
While the nation’s debt management agency has a track record of raising a larger volume of money in the first six months of the year, looming redemption payments have heightened expectations the NTMA will hit the upper end of its €9bn to €13bn bond issuance target this year.
Over the first quarter €6.5bn was borrowed from markets.
This latest auction will follow the dual-tranche strategy deployed in February and March, reflecting investor preference for shorter and longer-dated paper.
Investors will bid for between €1bn and €1.25bn of bonds split between six year and nine maturities at a coupon of 3.9per cent and 1 per cent rate respectively.
However the yield will be set by demand and is expected to reflect current market rates for government paper.
In March the NTMA secured its cheapest ever rates when it sold €500m of short-term debt, or Treasury Bills, in an auction that priced the notes at a negative yield of 0.43pc.
Despite the record low borrowing costs, Conor O’Kelly, the NTMA’s chief executive warned against a rush to accumulate more debt, telling an Oireachtas Committee hearing on March 8 that It is not really a good idea to borrow more money because interest rates are low.
He said it “is like saying to a household that it should go down to the bank and borrow more money, even though it has a big mortgage and credit card bills and a leased car in the driveway. That is the kind of situation we are in.”
However many remain convinced the NTMA will reach the upper range of its borrowing target given €13bn target given the state needs to repay €14bn of bonds in 2019 and a further €19bn in 2020.