Friday 15 December 2017

Central Banks' €39bn of Irish debt close to limit - despite ban

The Central Bank in Dublin
The Central Bank in Dublin
Donal O'Donovan

Donal O'Donovan

The ECB and Irish Central Bank now hold around 30pc of all Irish sovereign bond debt, making them the State's biggest creditors - ahead of even any one element of the Troika that funded the 2010 Bailout.

It means Ireland is pushing the 33pc limit the ECB has set for holding any one country's bonds. ECB bond buying over the past year has helped slash the State's borrowing costs.

The ECB and Central Bank of Ireland combined are understood to hold almost €39bn of Irish government bonds.

That's out of a total of €125.5bn of bonds issued by the State, according to data published by the National Treasury Management Agency (NTMA).

The ECB has purchased €19.1bn of Irish sovereign bonds under its so called quantitative easing (QE) programme, according to calculations yesterday by analyst Ryan McGrath at Cantor Fitzgerald. QE has helped drive down borrowing costs for the State and other Euro area borrowers by creating huge demand for bonds.

The idea behind QE is to drive down the financial return on Government bonds to encourage private investors to lend to riskier businesses and households. The pace of QE acquisitions fell to €547m in January, down from €648m in December, Mr McGrath said.

The average monthly purchases in 2016 were almost €1bn.

The ECB-held bonds are in addition to around €19.8bn of bonds that the Central Bank of Ireland holds as a result of the deal to scrap the so-called Promissory Note, part of the liquidation of IBRC.

That deal saw promissory notes that Anglo Irish Bank had used as security for loans from the Central Bank cancelled and swapped for standard Government bonds.

Irish Independent

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