NTMA raises €1.5bn in bond sale

IRELAND raised €1.5 billion yesterday, at higher interest rates than earlier this year, adding to the €93 billion national debt.

The National Treasury Management Agency (NTMA) bond sale was three times over subscribed, encouraging given the timing of the auction was not helped by Moody’s investors service ill-timed cutting of Greece’s credit rating to junk on Monday. Total long term funding of €16.4bn has been raised to date this year, €15bn through bond sales and €1.4bn in the domestic retail savings market through Prize Bonds, Saving Certificates and the new National Solidarity Bond.

The NTMA said: “With more than 80% of its long term borrowing programme completed, Ireland is in a strong funding position. Allowing for other cash balances the Exchequer is fully funded through end-2010.”

Bloxham Stockbrokers economist Alan McQuaid said demand was again quite solid. He said: “But the average interest rate paid to raise the funding was significantly higher (86bps for the 2016 bond) than earlier this year.” Mr McQuaid said a total of €750 million of the 4.60% Treasury 2016 bond was issued and total bids received were 3.1 times the amount allocated, while €750m of the 4.50% Treasury 2018 bond was also issued, with the total bids received were 2.9 times the amount allocated.

“It was the first time out this year for the 2018 bond, with the last sale of this issue taking place last August, so for comparative purposes the shorter-dated maturity, which has featured in two auctions already in 2010, is the best one to look at. The average yield on the 2016 bond was 4.521% as against 3.663% in April, when €750m of the issue was sold and the bid/cover ratio was 3.0,” he said.

Mr McQuaid said with more than 80% of its long-term borrowing programme completed, Ireland is in a strong funding position. “Allowing for other cash balances, the Exchequer is fully funded through end-2010. However, as we’ve pointed out on numerous occasions recently, Ireland, despite leading the way in fiscal austerity measures, is now being ‘tarred with the same brush’ as the likes of Greece, Portugal and Spain, which suggests that the NTMA may well end up paying higher interest rates to raise funds at the remainder of this year’s scheduled auctions,” he said.