Business Irish

Monday 19 August 2019

NTMA borrows €1bn at record-low rate

 

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Shawn Pogatchnik and David Chance

The State has borrowed €1bn over 10 years at a record-low cost, benefiting from investors seeking safe havens amid flatlining eurozone growth and global uncertainties.

Thursday's bonds issued by the National Treasury Management Agency (NTMA) offer a yield, or effective interest cost, of just 0.297pc, well below the previous record low in 2016. The auction was 2.7 times oversubscribed.

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It compares to a yield above 1.1pc when the NTMA issued identical bonds in January. While taxpayers benefit from cheaper borrowing costs, this demand for low-risk government bonds demonstrates weak economic sentiment, with investors opting for low returns on secure assets.

In its annual review of the eurozone economy, the International Monetary Fund (IMF) said forecasting any eurozone growth "is precarious, with three serious risks that could derail the upswing.

"First, prolonged global trade tensions could undermine external demand. Second, the risk of a no-deal Brexit remains high.

"Third, high-debt countries' failure to rebuild fiscal buffers and implement structural reforms leaves them more vulnerable to shifts in market sentiment and the next downturn."

Last week the ECB said it would delay any interest rate hikes until at least mid-2020 citing the eurozone's economic fragility. That added to investor gloom.

Ryan McGrath, head of fixed income strategy and sales at Cantor Fitzgerald in Dublin, said the NTMA has raised €10.25bn of its 2019 target range of €14-18bn and "is well ahead of its funding targets".

Switzerland, Germany, Denmark and the Netherlands have seen their 10-year bonds fall into negative yield territory. Sweden's borrowing costs are hovering barely above zero.

Irish Independent

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