Friday 15 December 2017

NTMA tries to reassure bond markets -- again

Donal O'Donovan

Donal O'Donovan

The National Treasury Management Agency (NTMA) was forced to issue a clarification to the bond market yesterday, after the price of AIB and Bank of Ireland subordinated bonds fell by 5pc of face value the previous day.

A bond analyst in London said comments on Wednesday by financial regulator Matthew Elderfield suggesting imposing losses on senior bonds had added to negativity.

The sell-off of Irish bank bonds on Wednesday was actually caused by a Moody's downgrade, analysts said, as some bondholders were forced to sell paper that now falls below the grade they are permitted to hold.

And the financial regulator had said he would oppose any effort to impair senior bonds but the scale of Wednesday's swing was exacerbated by the comments.

"There was no need for them (the comments)," one analyst said. "If prices were stable it would be one thing, but introducing confusion undoes the work of last week for anyone considering buying Irish bonds."


On yesterday's statement, the NTMA said Finance Minister Brian Lenihan has reiterated his commitment not to inflict losses on senior bondholders of the Irish banks.

"He confirms that he has no plans to change this position and that there is, therefore, no intention to impose losses on holders of such senior debt in any credit institution in the State," the statement said.

The clarification was circulated to prime dealers -- banks that sell on Ireland's debt to bond investors -- and posted to the NTMA website.

The NTMA said the latest statement was issued after "uncertainty among market observers and participants about the intended treatment of subordinated debt in issue from Irish banks".

Moody's downgraded the subordinated bonds of all Irish banks in a response to the government's plan to enact legislation to impose losses on subordinated Anglo Irish bondholders. The ratings agency said that has implications for subordinated bonds issued by all Irish lenders.

In response the NTMA told the bond market that losses will only be inflicted on subordinated bonds owed by institutions not listed on a recognised stock exchange, 100pc State owned and unviable without government aid.

Irish Independent

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