Thursday 8 December 2016

NTMA will borrow up to €10bn in bonds

Published 23/12/2015 | 02:30

Treasury Building. Photo: Tom Burke
Treasury Building. Photo: Tom Burke

The State's debt management agency is planning to issue between €6bn and €10bn worth of long-term bonds over the course of next year.

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The National Treasury Management Agency (NTMA) said it intends to hold at least one syndicated bond deal during the year, and will issue a statement at the beginning of each quarter outlining the auction plans for the coming months.

The amount of debt planned to be issued is lower that the €13bn worth of bonds issued this year, even with an April deadline looming to redeem an €8bn bond.

Philip O'Sullivan, economist with specialist bank Investec, said the State is holding a considerable sum of cash.

"The NTMA has done an awful lot of heavy lifting in replacing very expensive crisis-era debt," Mr O'Sullivan said.

"It's helped to significantly reduce the interest bill that the State pays every year, so it's just augmented the credit worthiness of the State.

"We've been saying to people we're no longer seen as one of the PIGS [Portugal, Ireland, Greece and Spain] as we were for so many years.

"We've now transitioned to what we call the semi-core. Our bond yield is much closer to France than it is to Italy," Mr O'Sullivan added.

In a recent interview, NTMA chief executive Conor O'Kelly said the funding requirement for next year would be smaller than 2015.

Nonetheless, Ryan McGrath of Cantor Fitzgerald Ireland said the range was lower than what would have been expected giving "flexibility to limit issuance if tax receipts and other revenues continue to come in ahead of expectations."

He added that it is "interesting to note that there is €8.1bn of the 2016s being redeemed in April, with approximately €9bn of Irish bonds expected to be bought by the ECB via the bond buying programme over the course of the year, so 'real' negative net supply of €7-11bn".

Ireland's public debt levels, while falling, remain high and, as Finance Minister Michael Noonan has pointed out, is one of the main risks facing the recovery.

The level of debt for this year is estimated to be around €203.8bn, or 97pc of the value of the economy.

The Government argues that the bond issuance by the NTMA of €13.4bn this year has been offset by early repayments to the International Monetary Fund (IMF) of just over €9bn.

Gross debt as a percentage of GDP is expected to fall to 92.8pc next year, and to 90.3pc by 2017.

In monetary terms, however, the debt pile is actually forecast to increase over the coming years, from €203.8bn this year, to €207.1bn next year, €210.9bn in 2017 and €211.6bn in 2018.

In January the NTMA raised €4bn through the syndicated sale of a new seven-year benchmark bond maturing in 2022. The funds were raised at a yield of 0.867pc.

A further €4bn was raised in February, at a yield of 2.088pc, through the sale of a new 30-year euro benchmark bond, the first such bond issued by Ireland.

Some €5bn was also raised through a series of bond auctions.

Irish Independent

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