Monday 24 July 2017

NMTA to borrow €1bn as bond repayment date looms

European Central Bank HQ in Frankfurt. Photo: Ralph Orlowski
European Central Bank HQ in Frankfurt. Photo: Ralph Orlowski
Frank O'Connor. Picture: ntma.ie

Gretchen Friemann

The National Treasury Management Agency (NTMA) will tap debt markets for another €1bn on Thursday, taking the Government past its minimum-funding target for the year and boosting cash buffers ahead of October's €6.3bn redemption payment.

This latest deal dual-track bond issuance comes as yields throughout the eurozone continue to decrease as a tapering of the European Central Bank's monetary-stimulus programme looks unlikely until after the German elections in September.

However, as demand for French sovereign debt continues to intensify, Asian investors, led by Japanese institutions, are increasingly snapping up Irish government paper.

Cantor Fitzgerald's Ryan McGrath pointed out that Ireland's debt now looks relatively cheap compared to the levels it was trading at prior to the French presidential elections. In mid-April just eight basis points separated Ireland and France's 10-year bonds (paper maturing in May 2026). That figure ballooned to 22bps yesterday, underlining the resurgence in investor appetite for French debt ahead of what has been billed as another victory for new French president Emmanuel Macron - this time in Sunday's parliamentary polls.

The NTMA debt auction, which was scheduled earlier this year, falls on the same day as the UK election. The deal - comprised of a 1pc bond maturing in 2026 and a 2pc bond that matures in 2045 - takes the total raised this year to over €9bn, and deepens expectations the government will raise its maximum target €13bn.

In a recent interview, Frank O'Connor, NTMA director of funding and debt management signalled the agency may even exceed that figure. However market Mr McGrath argued the NTMA was building in "optionality." Ireland must pay €6.3bn in bond redemptions in October, although this payout was factored into an annual €9bn-€13bn issuance target.

Irish Independent

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