Thursday 24 May 2018

Nearly half of all government bonds owned by residents of the State

Sarah McCabe

Sarah McCabe

NEARLY half of all Irish government bonds are owned by residents of the State, data has shown.

The Central Bank released its latest set of statistics on the subject yesterday, which clearly show an increasing trend for domestic ownership of our own sovereign debt.

In 2002, non-resident holders outweighed Irish resident holders 2:1; now that split is virtually 50:50. Of these Irish holders, the vast majority (91pc) are financial institutions – including the Central Bank itself, which took ownership of €25bn of long-term bonds created as part of the deal that extinguished the IBRC promissory note. The plan is to sell the bonds as quickly as possible.

Less is known about non-resident bond holders; the Central Bank does not provide any sectoral breakdown of this category.

However, anecdotal evidence and snippets of information released over the year reveal that this group includes everyone from one of the richest men in the world to a smattering of US vulture funds.

Those who bought in at the height of the financial collapse, when Ireland was viewed as a default risk and its bonds were cheap, have made a fortune as their value recovered. Irish bonds were the second-best performing government debt in the Bloomberg World Bond Index for 2013, generating returns of close to 12pc for investors. That was only topped by Greek bonds, which saw a 47pc return for investors.

One of these winners is Franklin Templeton, whose star trader Michael Hasenstab made a huge bet on the Irish recovery, buying close to €9bn in Irish bonds.

Bill Gates also has a substantial holding. His Bill and Melinda Gates Foundation owned about $20m (close to €14.4m) worth of Irish bonds at the start of last year.

But the single biggest foreign holder is thought to be the European Central Bank. At the start of last year, it revealed that it had €14.2bn of Irish government bonds on its books. It bought much of these through a programme known as the Securities Markets Purchase Scheme.

The geographic split of these non-Irish holders is understood to be changing. After abandoning Irish bonds as the country's credit rating tumbled, risk-averse Middle Eastern and Asian investors have begun to buy Irish government bonds once again.

Influential ratings agency Moody's decision to upgrade Ireland's credit rating to investment status in January was the key reason for this shift in policy, the head of state debt management agency the NTMA, John Corrigan, has indicated.

Irish Independent

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