NEW Irish bonds created for the pensions industry will be issued on a "demand" basis and not in tranches, eliminating the prospect that an issue will be embarrassingly under-subscribed.
A senior executive at the National Treasury Management Agency (NTMA) confirmed the sales model for the new bonds yesterday, and said the agency hopes to sell them from next month.
The bonds scheme was unveiled in the December Budget as a way of making it easier to channel billions of Irish pension fund money into government coffers.
The pension cash will be lured with specially tailored long-term government debt, which will carry an interest rate significantly above bonds issued by 'core' countries like Germany.
Pension schemes who embrace the sovereign bonds will also enjoy significant improvements in their funding positions as measured by the Pensions Board.
The NTMA has never said how much it hopes to raise in these special sovereign bonds, but some were hoping to get an insight into the agency's ambitions when the first block of bonds was launched.
Addressing a Dublin insurance gathering yesterday, NTMA deputy director of funding and debt management Anthony Linehan quashed those hopes.
Rather than following its general model of offering blocks of debt on a given day, the NTMA has decided to offer the pension bonds on a "demand only" basis. Mr Linehan said this was being done to "let each group of trustees work out their own timetable" rather than being forced to go along with the NTMA's timetable.
The agency hoped to hold the interest rate on the bonds "fairly consistent" for a number of months, he stressed.
The actual interest rate won't be available until the first bonds are issued in February and will be significantly lower than the rates existing Irish debt is commanding in the market.
"While anxious to facilitate Irish pension funds, the NTMA are conscious of the burden on the taxpayer and whereas Irish 10- year yields on the secondary market may be at temporarily elevated levels," said Mr Linehan. "It is not unusual for the market in long dated bonds to trade at considerably lower levels",
Mr Linehan also sharply rejected suggestions that the new pension bonds would see pensioners exposed to higher levels of risk. "The risk of Irish sovereign default is non-existent in my opinion," he said.
The comments came at a briefing hosted by actuarial consultants Lane, Clark & Peacock yesterday morning.