Wednesday 21 February 2018

Ireland joins rush to borrow long-term with new 30-year bond

The National Treasury Management Agency
The National Treasury Management Agency

Patrick Edwards

Ireland is joining the stampede to borrow money on the bond markets for 30 years.

The National Treasury Management Agency surprised the market yesterday by announcing that it will issue a 30-year bond to raise somewhere between €1.5bn and €2bn within days.

While the 30-year bond is the benchmark in the United States, it will be the first time the country has issued a bond with such a long maturity.

Italy and Portugal announced plans last month to lock in cheap borrowing costs for a very long period.

Investors are showing a strong appetite for longer-term bonds which provide higher returns than their short-term peers, which often trade in negative territory.

The NTMA said yesterday it had mandated Barclays, Citi, Credit Agricole CIB, Danske Bank, Davy and Royal Bank of Scotland as joint-lead managers for the transaction.

The NTMA will be taking advantage of record low funding levels to lengthen out the average maturity of Ireland's debt profile; a move that will be viewed favourably by the rating agencies.

The sale is expected to be launched and priced "in the near future subject to market conditions" with the bond due to mature on 18 February 2045, the NTMA said.

Analysts said 30-year bonds are aimed at the pension industry which is happy to have money tied up long time. Returns are poor for investors now but investors are likely to want to buy the bond because Ireland will be a better bet than many European countries over time because of the country's young population.

"We expect the deal to come to the market tomorrow," analyst Ryan McGrath of Investec said yesterday. "We anticipate that the deal size will be €2bn to €3bn, bringing the total amount funded by the NTMA in 2015 to nearly €7bn out of its stated €12bn to €15bn target for the year."

Both Italy and Portugal's 30-year bonds were well received last month with the market displaying a strong appetite for long dated bonds.

The European Central Bank said a fortnight ago that it will buy €60bn a month of public and private debt until September 2016 to revive inflation, sparking a surge in bonds that sent yields from Ireland to Spain to record lows.

The ECB added recently that the new bond buying programme will include maturities between two and 30 years which will help to underpin the performance of longer dated debt.

The new bonds will be the first from the NTMA since the Greek elections threw the markets into turmoil.

Irish Independent

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