Monday 23 October 2017

Clearest sign yet of confidence as investors dash to lend State money

Donal O'Donovan

Donal O'Donovan

NTMA secures debt deal at lowest interest rate since 2010 after loan offers of €11bn are put on table in just one week

INVESTORS in the bond markets have offered to lend €11bn to borrowers in Ireland over the past week, in the clearest sign yet that confidence in the Irish State is close to being fully restored.

The National Treasury Management Agency (NTMA) raised €500m in short-term debt for the State yesterday.

The 0.55pc interest rate is the lowest investors have charged Ireland since March 2010, before the first Greek debt crisis and subsequent bailout spooked investor sentiment across much of the euro area.

The NTMA said that investors put €2.06bn on the table yesterday, four times the amount that the State wanted to borrow.

The excess cash that investors indicated they were happy to lend is known as an "oversubscription". It was the third oversubscribed Irish deal this week.

The money will be repaid in three months and is seen as 'low risk' by bond investors.

The deal was the fourth of its kind this year, after the NTMA ventured back into the markets in July for the first time since the bailout in November 2010.

Wary investors charged an initial interest rate of 1.8pc at the July auction, but that has declined sharply to reach yesterday's low.

The money on offer yesterday took the total that investors had put up for Irish bond deals to almost €11bn for the week.

Investors had indicated their willingness to lend €2.5bn to Bank of Ireland when it raised €1bn through a covered bond deal on Wednesday.

That came after a massive €6bn was made available to the ESB when it tapped the markets for a relatively modest €500m at the start of the week.

Irish borrowers, including the NTMA, are now "spoiled for choice" when it comes to how much they want to borrow, according to Donal O'Mahony of Davy Stockbrokers.

It is a huge turnaround after the country was locked out of the market for two years until July. That has changed because of a restoration of confidence, but also because global investors are losing money when they lend to the likes of Germany and the US, forcing them to look elsewhere to make a return.


"The money we saw this week tells you we are in a world of excess liquidity," Mr O'Mahony said.

It has driven investors to hunt out "yield" or profits in places including Ireland where they refused to invest just months ago. The surge in interest to invest in Irish paper may also reflect the relative lack of opportunities.

The three deals done this week may well be the last of the year, not least because the State and the banks are all in relatively comfortable positions in terms of their need for money.

The NTMA is sitting on a significant cash cushion, while the banks are able to borrow cheaply from the European Central Bank. It means that, as borrowers, the State and banks can access the market on an opportunistic basis. That is something that reinforces investor confidence, Mr O'Mahony said.

Irish Independent

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