Business Irish

Saturday 17 March 2018

NTMA looks to borrow €2bn at rates below bailout charge

Donal O'Donovan

Donal O'Donovan

THE Government is set to borrow up to €2bn on the markets at interest rates below the 3.5pc charged under the bailout.

The National Treasury Management Agency (NTMA) will seek to borrow the cash in a technique called a "syndicated tap", it said in a statement.

The money will be borrowed for five years by increasing the size of an existing bond deal due to be repaid in four years.

The agency declined to say how much it will look to borrow in the latest deal, or at what price. Sources close to the process, however, said a deal was likely to be in the range of €1.5bn to €2bn.

There will be strong demand among investors for the bonds, according to Donal O'Mahony, an analyst at Davy Stockbrokers.

The Government could borrow in excess of €2bn but is under no pressure to raise a greater amount of debt in the near term, Mr O'Mahony said.

Funds raised on the markets since July last year means the country is actually sitting on a high level of cash, despite the ongoing deficit, he said.


The NTMA has indicated it wants to raise around €10bn on the markets over the course of this year.

Combined with existing cash balances, that will be enough to ensure the country has enough set by to cover its costs until the end of 2014, after the current bailout ends.

Even though it has no pressing need to raise cash on the bond market, the NTMA is under pressure to re-establish itself as a regular bond issuer before the bailout ends at the end of this year.

The deal that is likely to go ahead today is part of that process.

The €2bn will be borrowed by increasing the size of a bond due to be repaid in 2017. That bond was issued last year and at the time investors demanded a "yield" or interest rate of 5.85pc to lend to Ireland.


The same investors are likely to seek a yield in the region of 3.3pc to 3.4pc to hold the same five-year bond today, according to Ryan McGrath of Dolmen Stockbrokers-Cantor Fitzgerald.

It's slightly higher than the same bonds have traded in recent days, but comparable to the 3.5pc interest charged by European bailout funds, although those bonds have a longer lifespan.

The interest rate is substantially lower than the 5.85pc investors were charging only six months ago. That will be seen as a vindication of the NTMA's decision to pay an initial premium to ensure it could begin borrow on the markets again after a two-year absence last July.

The yield, or interest rate, investors were demanding to lend to Ireland for five years was as high as 17pc in July 2011.

The new bond deal marks "a massive step in Ireland's long process of fully regaining long- term bond-market access in 2013", according to Owen Callan, an analyst at Danske Bank.

Irish Independent

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