Monday 11 December 2017

Fresh round of borrowing on market as State looks to raise €500m

Donal O'Donovan

Donal O'Donovan

IRELAND'S return to borrowing on the markets is set to continue tomorrow with the latest issue of €500m of short-term government debt.

The National Treasury Management Agency (NTMA), headed up by John Corrigan, said it plans to place €500m of three-month "treasury bills" -- a type of short-term borrowing -- with investors tomorrow.

Investors who backed a €500m sale of similar debt in July were repaid in recent days and are likely to form the bulk of investors in the latest deal.

Tomorrow's auction will be the third deal of its kind including the July sale, when the state "dipped its toe" back into the markets for the first time since before the 2010 bailout.

The short duration of the IOUs being sold, which are known as "bills", makes it an extremely low-risk deal for investors, but the borrower, in this case the state, needs to constantly replace the debt through regular auctions.

The auction tomorrow looks assured of success in terms of finding investors, so the main attention is likely to focus on the interest rate, or yield, investors charge to lend this time around.

In July, investors were paid 1.8pc in interest to lend to the State over three months, getting a premium over similar deals because it was the first Irish bill auction for two years.

The interest rate fell to 0.7pc at the follow up auction in September.

The yield on Ireland's most watched IOU, a bond due to be repaid in 2021, dropped to 4.7pc yesterday, back below the pre-bailout level.

Irish Independent

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