Friday 17 November 2017

No cheaper money until EU's 'mood' improves -- NTMA

John Mulligan

John Mulligan

THE "mood music" in Europe needs to change before Ireland can borrow money at lower interest rates from markets, the head of the National Treasury Management Agency, John Corrigan, has said.

But Mr Corrigan declined to say at what interest rate the agency, which manages the country's national debt, would be willing to fully re-enter bond markets.

Last week, the NTMA surprised commentators by borrowing more than €5bn at a weighted interest rate of 5.95pc. That helped the agency reduce the amount of sovereign borrowings slated to fall due in January 2014 -- the month after our bailout programme is due to end -- from about €8bn to roughly €3bn.

Speaking on RTE radio yesterday, Mr Corrigan said that the impact of reducing that impending debt repayment as a result of last week's bond sale couldn't be underestimated.

"It's fair to say that it's not cheap money," he said of the borrowing cost on the bonds that were issued.

"It's slightly below the magic 6pc, but you couldn't do all of your borrowing going forward at that rate. But... you have to leave something on the table for investors. So, it was pitched at a level that hopefully, as we make further progress with the troika programme, will get more momentum behind it and we will see lower yields."


Last week's sale by the NTMA included €4.19bn in bonds that will be repaid in 2017 and 2020. Existing bond investors due to be repaid just over €1bn within the next two years were also persuaded to instead swap those bonds for new ones that will mature at a later date.

Most of the money raised last week was secured from foreign investors, with "very few hedge funds" involved, said Mr Corrigan. He said most of the investors had included "real money investors" such as pension funds and insurance companies.

Mr Corrigan acknowledged that the "big challenge" in helping to reduce the rates in any further borrowing would be the 2013 Budget.

"We have to meet the troika requirements in that respect. The bigger issue is the wider eurozone scene. The ratings agencies have made it clear that while they're satisfied that Ireland itself has made and continues to make good progress, our rating is where it is because of the wider eurozone problem. So, I suppose the mood music in Europe has to improve."

He also said that the overall bank debt had to be cut to help improve bond yields.

Mr Corrigan added that between September and the end of this year, the NTMA was likely to engage in two or three short-term treasury bill issuances. They typically have maturities of about three months.

However, he said that the "pressure is off" in terms of having to repeat last week's bond sale.

"We'll wait and see how the market develops," he said.

Irish Independent

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