Monday 18 November 2019

NTMA prepares second market foray with €500m issue

Donal O'Donovan

Donal O'Donovan

IRELAND'S return to the debt markets will continue tomorrow with a new issue of €500m of short-term government debt.

Yesterday, the National Treasury Management Agency (NTMA) said it planned to place €500m of three-month "treasury bills" -- a type of short-term borrowing -- with investors.

The planned deal is only the second time since the bailout of November 2010 that Ireland will seek to tap investors for short-term debt. It's the latest step in the effort to emerge from the international bailout by fully financing the country on the markets at the end of next year.

Analysts said they expected good demand for the new debt, not least because the previous three-month debt is due to mature -- creating an immediate demand among the previous holders.

Low-risk

The short duration also makes it an extremely low-risk investment, but it means the borrower must constantly recycle the IOUs to maintain its borrowings at the same level. The NTMA has already said it plans to hold two or three more bill auctions between now and the end of the year.

With buyer appetite likely to be assured, the focus for the NTMA will be on using the current positive sentiment towards Ireland to cut the country's borrowing costs.

In July, investors were 1.8pc in interest to lend to the State for three months, a price that included a premium because it was the first toe Ireland was able to dip into the markets in almost two months.

Yields, the interest investor demand to lend, have fallen since. The yield on Ireland's most watched IOU, a bond due to be repaid in 2021, dropped to 5.6pc yesterday, the lowest since August 2010.

Ireland returned to long-term debt markets in July, placing €4.2bn of new long-term bonds with investors. That was followed up with the first-ever issue of €1bn of "amortising bonds" last month.

Amortisation means simply that the principal and interest on the IOUs are paid out over the term of the debt, unlike most bonds, where all of the principal is repaid in one go when the debt matures.

Irish Independent

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