NTMA's 15-year bond sparks strong international interest
Wednesday October 07 2009
The National Treasury Management Agency (NTMA) raised €7bn in the bond market yesterday -- pre-funding about a third of what will be required to plug next year's expected government deficit.
Market observers said the bond, which matures in March 2025, was "priced to sell", resulting in it drawing in €16bn of subscriptions within an hour-and-a-half-of the order book being opened yesterday morning. It marks the first 15-year bond issued by the State in more than a decade.
The €7bn notes were priced at 1.65 percentage points over the benchmark mid-swap rate, which stood at 3.79pc yesterday afternoon.
Padhraic Garvey, head of investment-grade debt strategy at ING in Amsterdam, said the NTMA could have gotten away with paying 1.5-1.55 points over mid-swaps, looking at the country's peers and its outstanding bonds. Still, a source close to the transaction said: "This is a very positive deal. The willingness to lend long-term money was supported by the 'Yes' vote to Lisbon referendum. It is also a clear affirmation of the NAMA (National Asset Management Agency) strategy."
Oliver Whelan, director of funding and debt management at the NTMA, said he was "very pleased" by the international interest in the bond. German and UK investors each took up 23pc of the issue, with French investors a further 17pc. Meanwhile, Irish investors only accounted for 8.5pc.
Market sources said the level of UK interest in the bond was significant, given that participants from that market had been very wary of Irish sovereign and bank issuances earlier this year.
The debt markets responded well to the placement, with the keenly-followed spread between Irish and German 10-year bonds narrowing by 0.05 percentage points to 1.652pc points.
Barclays Capital, Davy, Deutsche Bank, HSBC, ING and Royal Bank of Scotland managed the sale.
The bonds will help finance next year's Budget and extend the maturity of Ireland's debt portfolio. The Government last week raised the estimate for this year's budget deficit to 12pc of gross domestic product, from 10.8pc.
The NTMA has already raised €24.5bn in the bond markets this year and expects to top this up with a further €2bn in bond auctions to be held later this month and in November. Ulster Bank chief economist Simon Barry said the NTMA's latest move took advantage of favourable conditions in the international bond markets.
He noted that current government forecasts pointed to the Exchequer needing to plug a €20bn deficit next year.
"That figure will probably have to rise," he said, following the release last Friday of figures which showed that tax revenues collected this year will be €2bn below target.
Ireland's cash balances stand at €30bn following yesterday's deals.
- Joe Brennan
Irish Independent
