Monday 22 May 2017

NTMA raises €609m with first inflation-linked bond

The NTMA plans to raise between €9bn and €13bn this year. Photo: Reuters
The NTMA plans to raise between €9bn and €13bn this year. Photo: Reuters
John Mulligan

John Mulligan

Five years after first considering the move, the National Treasury Management Agency (NTMA) has issued its first inflation-linked bond, securing €609.5m.

The NTMA said the decision to issue the bond had been client-driven, and added that the move helps the agency to diversify its funding channels.

Other countries such as France, Italy and Germany typically have between 6pc and 10pc of their total debt in the form of inflation-linked bonds, which are usually in demand from specific investors such as those operating in the pensions and insurance sectors.

The buyers of the NTMA bond - all Irish - also fell into those categories.

NTMA funding and debt management director Frank O'Connor said that while the amount of money raised under the bond was important, the real importance was the bond issue itself.

"It is a significant event for us," he said. "The transaction today is less about the money that has been raised, although that is really important; it's more about opening up a new channel to allow us to engage with a broader spectrum of investors. It's an important option for us."

Mr O'Connor said that it was beneficial for the agency to undertake an inflation-linked issue now rather than come cold to the market next year or in 2019.

He added that the NTMA expects to get some follow-up enquiries from other potential clients following yesterday's issue.

"We'll see where that takes us in the short term," said Mr O'Connor.

The bond issue was executed through Davy. It matures in April 2040 and carries a coupon, or interest rate, of 0.25pc.

If inflation hit 1pc over the bond's lifetime, then the nominal return would be 1.25pc.

The NTMA plans to raise between €9bn and €13bn this year.

It has already raised €7.75bn and holds its next auction in June.

Irish Independent

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