Moody downgrading fails to dampen demand for NTMA bond aution

DESPITE Monday’s downgrading by rating agency Moody’s, demand for yesterday’s €1.5 billion bond auction by the NTMA (National Treasury Management Agency) reflected signs of an easing in funding pressures across the EU.

But it also reflected an increase in the risk premium demanded by investors for funding Ireland’s state coffers. The NTMA says in raising 90% of its €20bn target for 2010, the state coffers are now funded until the second quarter of 2011.

But the price demanded by investors on the Government’s 10-year bond issuance was disappointingly north of 5% at 5.537%. Whilst affordable in the good times, it is today a significant debt-servicing cost to be borne by the state and its taxpayers.