Saturday 18 January 2020

NTMA's €500m auction of debt is heavily over-subscribed

Stock image: Reuters
Stock image: Reuters

Gretchen Friemann

The National Treasury Management Agency's auction of €500m of short-term debt passed off exactly as expected yesterday, with investors accepting a negative yield in line with other markets in the region.

The 12-month Treasury Bills attracted a yield of negative .41pc and the sale was 2.8 times over-subscribed. In March, the same volume of T-Bills were sold at a rate of negative .43pc.

The yield, which moves inversely to price, means investors are paying the State for the right to hold their money, an environment that is generated by the European Central Bank's quantitative-easing strategy.

But fixed-rate investors were more fixated yesterday on the impact of the Federal Reserve's interest rate increase and its decision to scale back its $4.2 trillion (€3.75 trillion) portfolio of Treasury bonds and mortgage-backed securities, which had been accumulated in the wake of the financial crisis.

A call from three Bank of England officials to increase rates, on the back of concerns about higher levels of inflation, also raised questions about whether the long-anticipated bond rout looms on the horizon.

According to Davy's Eamonn Reilly, yields on Irish 10-year bond rates may shift lower by 10 to 15 basis points by the end of the year on the back of another interest rate rise by the Fed.

However bond markets in the US remained sedate, indicating that the market views drastic changes in yields as unlikely.

Separately, the NTMA cancelled another €500m of the floating rate bonds issued in connection with the IBRC liquidation, as the Central Bank continues to accelerate its sell-down of the notes. To date, €7.5bn have been sold back to the NTMA and cancelled, leaving €17.5bn outstanding.

Irish Independent

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