Tuesday 6 December 2016

Strong demand for Irish bond as investors offer €9bn despite China market rout

Published 07/01/2016 | 13:45

NTMA Chief Executive Conor O Kelly chats with Minister for Finance Michael Noonan, before the publication of the NTMA Annual Report for 2014 and mid year update for 2015 at the NTMA HQ in Dublin.
NTMA Chief Executive Conor O Kelly chats with Minister for Finance Michael Noonan, before the publication of the NTMA Annual Report for 2014 and mid year update for 2015 at the NTMA HQ in Dublin.

The State borrowed €3bn for 10 years at an interest rate of just 1.156pc today.

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Investors had offered to lend €9.6bn to the Government in the first major bond deal of 2016, which would have met almost the entire borrowing requirement for the year. However, “just” €3bn of bonds were issued.

The National Treasury Management Agency (NTMA) lined up a group of banks to manage a so called syndicated 10-year bond deal, which will price on Thursday.

Market sources said the deal is set to be for around €3bn - a so called benchmark size. It has attracted strong demand despite volatility on the markets today on the back of the latest Chinese share plunge.

The NTMA mandated Bank of America Merrill Lynch, Barclays, Davy, Morgan Stanley, RBS and Societe General as joint lead managers for the deal. In a syndicated bond structure the leads act as underwriters and to sell on portions of the bond to other investors.

The bond deal had been expected, though there were some fears it could be postponed because of volatility in the global financial markets this week. The Government has previously indicated that total borrowing on the markets this year will be in the region of €6bn to €10bn.

Much of that will be to pay off €8bn of bonds falling due to be repaid in April. Even so the new targets could mean borrowing less than half the €13bn of debt raised last year, thanks to a combination of higher tax income and one off income including from the sale of AIB shares that will be used to pay off debts.

Gross debt as a percentage of GDP is expected to fall to 92.8pc of the size of the economy this year, and to 90.3pc by 2017. In cash terms, however, the debt pile is forecast to rise to €207.1bn.

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