Business Irish

Saturday 19 October 2019

NTMA facing €35bn debt bulge as bonds mature

Michael Noonan says Government to advertise Central Bank top job

NTMA boss Conor O’Kelly and Michael Noonan at the report’s launch in Dublin yesterday
NTMA boss Conor O’Kelly and Michael Noonan at the report’s launch in Dublin yesterday

Peter Flanagan

THE State's debt management agency is set to begin to refinance as much as €35bn worth of bonds due to mature between 2018 and 2020, in a bid to reduce the pressure on its coffers.

NTMA chief executive Conor O'Kelly said that while the yield on Irish bonds had tumbled in recent years, he was acutely aware of two upcoming "chimneys" of bonds that are due to be paid back in the next three to five years.

The problems of large amounts of debt falling due around the same time has come up before and can be difficult to resolve if not addressed early.

"There are some very significant chimneys of debt maturities coming in those three years so we focus on managing ahead to get some switching and buy backs to smooth it out but that will be a significant focus," he said.

Mr O'Kelly added that the NTMA was also likely to issue debt denominated in dollars as well as index-linked bonds in a bid to diversify investor interest.

The plan to issue bonds in US dollars may seem counter-intuitive at a time of a weak euro, but Cantor FitzGerald's head of fixed income for Ireland, Ryan McGrath, dismissed concerns as the currency risk would be hedged relatively quickly once the bonds have been issued.

"What we would say that the NTMA would always be very keen to broaden their investor base. US investors were some of the earlier investors to get involved in the Irish recovery story," Mr McGrath said.

"The fact that Irish 10-year yields would be a lot lower than the US 10-year rate means our bonds would be less attractive, so it would make sense to issue debt in dollars to keep those investors engaged," he said.

"We would have no concerns with exchange rate risk as in the background these would all be swapped back in currency swap mechanisms, so that should not be a factor at all," he added.

While the NTMA seeks to replace current bonds with debts falling due later, there is also pressure to reduce the overall national debt, and in particular the country's debt ratio - seen by investors as a key measure of the health of an economy - closer to the Eurozone average.

According to Finance Minister Michael Noonan, the debt ratio is now falling "quite rapidly" from a peak of 123pc of the size of the economy two years ago to an estimated 95pc next year.

Mr Noonan said he has now advertising for a replacement for Patrick Honohan as Central Bank governor. An international headhunter has been hired to identify candidates.

Mr Noonan said he hopes potential hires are identified by September, with a governor named by November. Mr Noonan and Mr O'Kelly were speaking at the launch of the NTMA's annual report for 2014.

The report reveals that of the agency's 759 staff at the end of 2014, 33 were earning more than €150,000 per year. of those 33, 19 were working for Nama. The State bad bank falls under the umbrella of the NTMA.

Irish Independent

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