Monday 23 July 2018

Investors bid €14bn for Irish State's bonds in 2018 debut

Conor O’Kelly, CEO of NTMA. Photo: Chris Bellew/Fennell Photography
Conor O’Kelly, CEO of NTMA. Photo: Chris Bellew/Fennell Photography
Donal O'Donovan

Donal O'Donovan

Bond investors piled into the market yesterday as the Irish Government borrowed €4bn in a deal that reopened the European bond markets for 2018.

Total orders placed by would-be investors topped €14bn, helping keep the yield - or effective interest rate for the State - at 0.94pc, slightly lower than guidance. It means in effect that the State is paying less than 1pc a year interest to borrow over 10 years.

The deal continues a five-year trend of the National Treasury Management Agency (NTMA) coming to market with a significant debt deal at the start of the year.

The 10-year, syndicated, euro-denominated bond means that roughly a quarter of the NTMA's total 2018 borrowing target has been reached.

The total raised is well below the amount offered by investors, but at the top end of the €3bn to €4bn target.

Banks and brokers mandated to manage the deal for the NTMA executed the trade without any ill-effects from the advent yesterday of wide-ranging EU financial market regulatory reforms known as MiFID II.

Syndication, rather than an auction of bonds, helps broaden the investor base looking at the Irish debt, especially when a deal is being done on such a large scale.

Last year, the NTMA tapped bond investors for €17bn, which was largely used to facilitate repayment of existing debt, including relatively expensive rescue loans dating back to the 2010 EU/IMF bailout.

The NTMA has over the last three years taken advantage of record low funding rates, boosted by ECB bond-buying and the recovery in investor confidence as growth returned and accelerated here, to lower borrowing costs and lengthen the maturity of the national debt.

That effort was boosted at the end of December when Ireland received a second credit rating upgrade in three months, from rating agency Fitch, which confirmed an A+ rating heading into the Christmas break.

Citi, Danske Bank, Davy Stockbrokers, JPMorgan, Morgan Stanley and Nomura were joint lead managers.

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