Monday 10 December 2018

€51bn of Irish bonds due for repayment

The NTMA has indicated that Ireland will borrow €14bn to €18bn this year (stock picture)
The NTMA has indicated that Ireland will borrow €14bn to €18bn this year (stock picture)
Donal O'Donovan

Donal O'Donovan

Around a third of the €127bn of bond debt owned by the State falls due for repayment over the next three years, and is largely owed to international investors.

Data from the Central Bank, which tracks holders of Irish government bonds, shows the total outstanding increased by €687m to €1.27379bn in November 2017.

Over the coming five years, €51.78bn of bonds will mature.

The Central Bank is banned from lending to the State, but it is now the biggest single holder of government bonds, a result of a combination of the deal to replace the old Anglo Irish Bank promissory note with government issued bonds, and of quantitative easing (QE).

Under QE euro area central banks have bought up billions of euro in government bonds, including Irish debt.

The State is expected to run a balanced budget this year, but will continue borrowing on a large scale to fund bond repayments.

Bond markets have been hugely favourable for borrowers in recent years, but there are growing signs that climate will worsen. The European Central Bank's QE spend has been halved to €30bn a month from the start of this year, and is due to be phased out altogether.

Yesterday, China added to bond investors' jitters when senior government officials in Beijing recommended slowing or halting purchases of US Treasuries, according to people familiar with the matter.

China holds about 19pc of all foreign-held US government debt, the latest available Treasury data shows.

Any reduction in Chinese purchases would come just as the US prepares to boost its supply of debt. The Treasury Department said in its most recent quarterly refunding announcement in November that borrowing needs will increase as the Federal Reserve reduces its balance sheet and as fiscal deficits look set to widen.

Here, the loss this year of central bank purchases as an underpinning for private sector bond investment is widely expected to push up yields, and therefore make new borrowing more expensive although National Treasury Management Agency (NTMA) officials insisted last week that the real impact remains hard to gauge.

The NTMA has indicated that Ireland will borrow €14bn to €18bn this year. An auction of the first €4bn of that last week was inundated by demand.

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