Sunday 24 September 2017

State raises €500m in debt as investors show keen interest

Donal O'Donovan

Donal O'Donovan

The State raised €500m in short-term debt yesterday as it continues to edge back into regular borrowing on the money market.

The National Treasury Management Agency (NTMA) paid investors an interest rate of 0.7pc to lend to the country for three months, the same rate paid at a similar auction in September.

It compares with interest of 1.8pc paid in July, when the NTMA issued three-month debt for the first time since the bailout.

There was strong interest from investors in yesterday's deal.

Global money managers offered to lend as much as €1.8bn to the country on the day, though the NTMA stuck to its €500m target.

While some market watchers anticipated lower borrowing costs in the third deal of its kind this year the 0.7pc compares well to other issuers, according to Ryan McGrath, a bond trader at Dolmen Securities.

"It is around the same rate as Italy is paying and that country is not in a bailout, I think the NTMA will be comfortable with this rate," Mr McGrath said.

The NTMA is now expected to auction short-term debt on a monthly basis until the end of the year, as part of the gradual return to full market access that needs to be complete by the end of next year, in order to avoid a second bailout.

It is the latest stage in a steady campaign of gradual re-entry to the markets that kicked off with a swap of some outstanding debt for longer-term borrowings and, most importantly, raised €4.2bn of new long-term debt at the end of July.

Spain also enjoyed success in the markets yesterday, raising more money than expected in an issue of short-term debt, and cutting its borrowing costs.

It came after rating agency Moody's kept its credit rating unchanged.

Spain raised €4.6bn on the markets and is now close to meeting its target for debt-raising for the year.

The news came as it emerged that the amount of money on deposit in Irish government-guaranteed banks dropped 0.5pc in September, according to the Department of Finance.

The savings level dipped by €800m to €153bn last month. It is the second month in a row to experience a decline, according to departmental data.

The figure is for money on deposit at the so-called covered banks: AIB, Bank of Ireland and Permanent TSB where savings are protected or "covered" by an enhanced State guarantee.

Even with the latest decline, the figure is up by about €13bn since the low point of €140bn in June of last year.

The Department of Finance began publishing figures for deposits with Irish banks late last year.

The latest decline comes as banks here have been slashing the rates they pay to savers, as part of an effort to return to profitability.

Irish Independent

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