Friday 19 January 2018

NTMA to dip its toe into the bond markets tomorrow

Thomas Molloy

Thomas Molloy

Agency will borrow €500m for three months as confidence in Ireland rises

THE National Treasury Management Agency will make a well flagged return to the bond markets tomorrow, the first time the country has borrowed any money from private investors in almost two years.

Tomorrow's sale will be the first stage in a "phased re-entry" to the markets, NTMA boss John Corrigan said yesterday. Officials from his agency have been criss-crossing Europe in recent days to prepare the way for the sale and ensure that it does not flop.

The European Commission described the sale as a sign of the "increasing confidence" in Ireland's "strong record" of implementing its aid programme.

"I wouldn't call it a big deal in itself," said Eoin Callan, a senior bond dealer at Dankse Bank in Dublin. "But it does mark a noteworthy step in the right direction."

The NTMA will borrow €500m and then repay it in October as it gingerly tests the markets. The sale of so-called treasury bills is a step in the Troika's plans for an orderly return to the markets next year, when the State will have to borrow money for much longer periods.

Other bailout countries, such as Portugal and Greece, never stopped selling treasury bills, but the NTMA abruptly halted all sales as Irish yields soared in the autumn of 2010.

Scandinavian pension funds have shown significant interest in the sale and most of the buyers are likely to be foreign, Danske's Callan said yesterday.

Irish bonds have been rising slowly over the past 12 months and have performed well since European leaders said last week that they may look at measures to help Ireland.

Those comments pushed down the notional yields on Irish bonds, which should make it cheaper to borrow when the NTMA actually begins to sell bonds again.

The yield on the nine-year bond, which is the industry standard, fell to around 6.23pc yesterday from 7.11pc last week and twice that last year.

"It's positive news, Ireland has done relatively well in its reform programme," said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. "The market is saying that perhaps Ireland is on its way out of the bailout programme."

The bills may be priced at a rate of slightly less than 2pc, Danske's Callan and Davy Stockbroker's Andy McEntee said. Both organisations are primary dealers in Irish government debt.

Not everybody saw the decision as significant. "Ireland issuing T-bills is by no means the big deal that some are making it out to be," said Megan Greene, a senior economist at Roubini Global Economics in London.

There was further positive news for the Government yesterday, when bond rating agency Standard & Poor's said it was upgrading bonds in State-owned Irish Life Assurance.

Bonds in Irish Life Assurance, which is part of the Irish Life Group recently sold to the Government, were upgraded to 'BBB+' from 'BBB-' and removed from credit watch negative.

"The upgrade reflects our view that the sale to the Irish Government on June 29, 2012, has significantly reduced ILA's risks and exposures," S&P said.

Irish Independent

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