Surprise early fund-raiser to bring in €5bn
Published 14/01/2010 | 05:00
THE Government is expected to raise €5bn towards its €20bn borrowing requirement today, in a surprise fund-raising from local and international banks and investment funds.
Market sources said there was strong interest in the 10-year syndicated loan being put together by stockbrokers Davy and leading international banks Barclays, Citigroup, Credit Lyonnais, Deutsche and UBS.
The National Treasury Management Agency (NTMA), which handles the national debt, sets a minimum of €3bn for such loans in order to create a sufficient quantity of bonds issued in return for the market to trade.
Raising €5bn implies offers of around €8bn from insurance and pension funds and other institutional investors.
"The market appetite for it is very strong from a broad range of European fund managers," said Barry Nangle, head of the bond desk at Davy's.
The NTMA already has €5bn in long-term loans in the till for this year.
With expected government borrowing of €20bn, and only €1.2bn of existing loans due for repayment this year, the new loan would see the agency holding almost 40pc of this year's borrowing requirement by the end of January. The rest could come from the regular series of monthly auctions of around €1bn in bonds to the highest bidders, but it is not clear if any further borrowings will be needed to re-capitalise the banks in 2010.
The Government is expected to pay around 5pc interest on the bonds, which will be repaid in October 2020.
That is just over 1.5pc higher than the rate on German 10-year bonds, which set the benchmark for euro bond markets. The new NTMA chief executive, John Corrigan, said earlier this month that there may be no return to the very low interest rates of the boom years and it will be difficult to get the spread over Germany below 1pc.
The NTMA is believed to have decided to organise the syndicated loan so early in the year because there seems to be good demand for government debt, with recent issues from Austria, Belgium and Spain.