Sunday 18 March 2018

Government to test bond markets to raise €500m, stock markets rally

Members of the Troika arriving at the Department of Finance to begin their sixth quarterly assessment of Ireland's bailout programme
Members of the Troika arriving at the Department of Finance to begin their sixth quarterly assessment of Ireland's bailout programme
Minister for Finance, Michael Noonan and John Corrigan, Chief Executive, NTMA

THE National Treasury Management Agency has announced plans to test the bond markets selling €500m of short-term debt or Treasury Bills on Thursday.

The move follows a ground-breaking deal struck in Brussels last week that is expected to give Ireland breathing space on its €64bn in bank debt and has also resulted in lower borrowing rates or yields.

And it comes as EU/IMF/ECB officials arrived in Dublin today for their seventh review of the bailout programme.

While the borrowing rate is likely to still be higher than the rates on the IMF/ECB/EU troika bailout loans, the move had been anticipated as part of an eventual overall return to bond markets in 2013.

“The resumption of Treasury Bill auctions follows an intensive engagement with investors both domestically and overseas during the past 18 months and marks an important first step in our phased re-entry to the capital markets,” said NTMA John Corrigan.

The NTMA manages the country’s debt.

According to Mr Corrigan, the bills will have a maturity date of October.

The move is the first since September 2010.

The yield on 10-year longer-term bonds stood at just over 6pc today and has been falling since last Friday's Brussels summit where a deal was struck for Italy, Spain and Ireland.

Meanwhile, European shares joined a global rally in stocks today as expectations rose that major central banks will take more action to support the world economy, after factory data highlighted the drag on growth from the euro zone debt crisis.

However, the euro held steady near $1.26 to the dollar, under pressure from reports that Finland and the Netherlands opposed a key element of a deal agreed by European leaders on Friday to allow a new bailout fund to buy government bonds in the market.

Equity markets were mostly focused on the July 5 meeting of the European Central Bank, when it is widely expected to cut its main interest rate by 25 basis points to 0.75pc.

"If the ECB offers loud support this Thursday with a rate cut and a signal of more to follow in the face of lower growth and inflation, there may be enough fuel for a summer rally in stock markets," said Bill O'Neill, EMEA Chief Investment Officer for Merrill Lynch Wealth Management.

The FTSE Eurofirst 300 index of top European companies gained 0.3pc to 1038.43 points, adding to a 4.2 percent jump seen since Friday.

Business Newsletter

Read the leading stories from the world of Business.

Also in Business