NTMA boss: State could re-enter the bond market before the year end

THE NTMA says it could re-enter the bond market they were forced to abandon after the lenders lost confidence in the economy.

Chief executive of the National Treasury Management Agency John Corrigan said it was possible that the state could re-enter the bond market before the year end but on balance said a return to normal borrowing was more probable in 2012.

Such a move would be “welcomed” by the IMF, which would regard the move as an endorsement of the €85bn rescue plan.

The cost of borrowing under the bailout is 5.7% and bonds would have to fall to that level before the NTMA would dip its toe back into the market.

Mr Corrigan believes the uncertainty in the market will start to ease this year, though the 7% rate facing Portugal due to go back into the bond markets next week is “extremely worrying”.

The bond crisis is “certainly not going to be resolved in the next couple of weeks,” he said. “I suppose the way we see it is it is possible in 2011 but probable in 2012. And certainly the EU, the ECB and the IMF would obviously be keen to see us return to the market because that would be a reflection of the success of the programme,” he said.

Ahead of the market turmoil Mr Corrigan noted the NTMA had raised €20bn in long-term funding, used to fund the exchequer deficit of €18.7bn for this year and to refinance €1.2bn of maturing debt.

That was achieved before funding conditions saw a sharp deterioration during the final quarter of the year.

While that was done successfully, the NTMA chief said 2010 “has undoubtedly been a very challenging year”. Investor fears over the banks and systemic eurozone issues in the end led the Government to “seek assistance through a three-year EU/IMF funding programme the end of November,” he said.

In its end of year review, the agency said Ireland paid out €4.8bn last year in interest on our debt, which is almost 25% of the €20bn raised this year to fund our growing debt. Our national debt stood at €93.4bn by the end of 2010, while the general government debt, which includes money committed to banks and the debt of local authorities and non-commercial semi-state companies, was €148.6bn.

Mr Corrigan downplayed suggestions that we could be looking at another NAMA Mark 11 and said selling off “non-core assets” without doing further damage to the taxpayer or the lending institution was the key objective of the restructuring exercise currently on going.

Picture: John Corrigan: The cost of borrowing under the bailout is 5.7% and bonds would have to fall to that level before the NTMA would dip its toe back into the market. Picture: Billy Higgins