Business Irish

Thursday 8 December 2016

State to tap bond market, taking borrowing above €8bn

Published 02/11/2016 | 02:30

NTMA's Treasury Building
NTMA's Treasury Building

The Government will borrow an additional €750m tomorrow, taking advantage of historically low debt costs.

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The National Treasury Management Agency (NTMA), which borrows on behalf of the State, has already raised €7.5bn on the markets so far this year, including €1bn in October.

The agency set a target to raise €6bn to €10bn of debt this year. The State is now fully funded, but is borrowing in order to retire more expensive debt early. Thursday's deal will see an issue of €750m of bonds falling due in 2030, that carry a coupon or interest rate of 2.4pc. However, the bonds will be sold at a premium that in effect drives down the true borrowing cost.

On the markets yesterday the yield on Irish 10-year bonds was 0.64pc, well above recent levels but low in historic terms.

Elsewhere, Italy's borrowing costs hit eight-month highs on Tuesday with investors focused on political risks and stuttering banking sector reforms there as anxiety about other lower-rated euro zone nations has eased.

The formation at the weekend of a minority Spanish government after a 10-month political stalemate has prompted markets to throw the spotlight east to Italy instead for what could be a nervy year-end.

The gap between Italian and Spanish 10-year borrowing costs - viewed as a key indicator of political risk - rose on Monday to 0.414pc, its highest since 2012.

Concern about Italy centres on a referendum on December 4 in which voters will decide whether to approve Prime Minister Matteo Renzi's programme of constitutional reforms to reduce the role of the Senate and the powers of regional governments.

(Additional reporting Reuters)

Irish Independent

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