NTMA raises €600m in short-term treasury bills

THE National Treasury Management Agency (NTMA) has topped up the country’s funding reserves, raising a further €600 million in short-term debt and avoiding the higher borrowing costs currently linked with longer-term bonds, in the process.

The latest borrowing round was carried out via the sale of treasury bills (otherwise known as T-Bills), which are usually repaid over months rather than years; as is the case with the Government bonds the NTMA has been selling since the start of the year, and through which it has already raised virtually all of Ireland’s funding requirements for this year and part of next.

Yesterday’s auction (the next T-Bill auction is on September 9) included bills of six and eight months maturity – and was six times oversubscribed. The cost of borrowing was lower on this auction, mainly due to the shorter-term bills, with an average yield – basically the interest rate demanded by investors – amounting to 1.98% on the six month bills and 2.35% on the eight month bills.

The latest auction came towards the end of a week marred by Standard & Poor’s downgrading of Ireland’s credit rating; which also pushed up our s long-term borrowing costs (the average yield on Irish 10-year bonds climbing above 5.4%, as a direct consequence).

While yesterday’s auction was initially being viewed as justification for the Government’s opposition stance regarding the S&P downgrade, it is feared that the country is still borrowing at too high a cost for the long-term.

The NTMA needs to borrow €25m for 2011, even though some of that has been met.

The successful capital fundraising efforts of AIB and a resolving of how much, in total, will be put into rescuing Anglo Irish Bank are seen as the main challenges to meet to control our s borrowing costs.