Friday 26 December 2014

NTMA to raise bonds worth €1bn in first post-bailout test of markets

Published 11/03/2014 | 02:30

John Corrigan, CEO of the National Treasury Managment Agency. Photo: Frank Mc Grath.
John Corrigan, CEO of the National Treasury Managment Agency. Photo: Frank Mc Grath.

The country will this week hold its first public debt auction since the end of the bailout.

The National Treasury Management Agency plans to raise €1bn worth of 10-year bonds that pay an interest rate of 3.4pc in an auction this Thursday.

It is the first time the Government will borrow on the markets since ratings agency Moody's lifted Ireland's credit status to "investment grade" in January – the deal will be closely watched to assess the appetite from investors in Asia and the Middle East in particular.

The deal is also the first "scheduled" bond auction since September 2010, meaning it is being flagged in advance to prospective investors. It is expected to be the first of a regular flow of deals in 2014.

"(It) marks the full normalisation of Ireland's presence in the markets," NTMA chief executive John Corrigan said.

In January, the NTMA borrowed €3.75bn using a "syndicated" bond deal.

Unlike the public bond auctions normally used by governments to raise cash, the syndicated deal was underwritten in advance by a group of lenders.

The underwriting banks guaranteed to buy the bonds even if no other investors are interested, meaning there was no risk of the deal failing because in effect the money was tied up ahead of the actual bond deal.

This week's deal is a "tap" or add-on to January's 10-year bond, meaning investors will be paid interest between now and 2024, when they get their original capital back.

Earlier this month, Mr Corrigan indicated that his agency will seek to raise around €4bn this year by holding one or two bond auctions every three months.

The agency is being forced to balance the benefits of borrowing in what is now a very low interest rate environment against the need to keep a lid on the national debt.

Irish Independent

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