Sunday 18 March 2018

Hitting Budget targets key to full market return - NTMA

John Corrigan chief executive, NTMA.
John Corrigan chief executive, NTMA.

Brendan Keenan and Sarah Collins

Tough budgetary measures are 'essential' to regain trust among international bond investors

KEEPING to Budget targets will be essential for any successful return to commercial borrowing by Irish governments, the man in charge of managing the national debt said yesterday.

John Corrigan, chief executive of the National Treasury Management Agency (NTMA), was speaking after the first market borrowing by the State in almost two years.

The €500m "auction" of bonds due for repayment in October was widely hailed as a success. Lenders accepted an interest rate of 1.8pc, which is lower than those for similar bonds in Italy and Spain.

There also appeared to be strong demand for the bonds. The NTMA said reports from dealers showed that most of the lenders were European banks and asset managers, rather than traders looking for quick profits.

"There are real money investors," Mr Corrigan said. "That contrasts with similar auctions by Greece and Portugal, where the bonds ended up with the European Central Bank."

More serious borrowing by the Spanish government yesterday proved difficult.

The Madrid Treasury paid the highest rate in over seven months to borrow 10-year funds. The average yield of 6.43pc was up from just over 6pc on June 7.

Mr Corrigan said he believed the Irish yields might have been lower than Spanish even without the EU summit last week, but breaking the link between bank and government debt was important.

ECB president Mario Draghi said the Irish auction "must be a success which should be properly celebrated".

"Actually, it's so important that an event like this would be one of the various factors that are making the financial environment nowadays a little less tense than it was a month ago," he said after announcing yesterday's interest rate cut.

European leaders are hoping for a serious return to com- mercial borrowing by Ireland as early as September. This could involve borrowing for two years, and in larger amounts than yesterday.

EU Commissioner for economic and monetary affairs Olli Rehn said the bond auction was "an important step in a difficult environment towards a full return to the market".

Mr Corrigan said he saw yesterday's exercise as very much a re-engagement with international investors after two years.

"We made a really substantial effort on investor relations before this auction, in the USA and Asia as well as Europe," Mr Corrigan said.

"Having the 2012 Budget come in on target is a key message we have been hammering to investors, as the 2013 Budget continues the commitment to the (EU/IMF) programme."


The €80bn of lending from the EU/IMF comes to an end by 2014 and the strategy is to substitute some of this with market borrowing during next year.

Ireland then faces a "funding cliff" at the beginning of 2014, with old loans of €8.5bn having to be replaced.

Mr Corrigan said they were looking at the possibility of asking the lenders to postpone the repayment date of some of that debt. It has already successfully "switched" €3.5bn of existing debt in this way.

"You have to be opportunistic and look for a gap in the traffic," he said. "Getting back to the markets is like trying to cross the M50 -- make sure there is no juggernaut coming."

Irish Independent

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