2013 return to bond market is unlikely, says broker

THE National Treasury Management Agency (NTMA) will not be able to return to the markets at the end of 2013 but will only need a mini-bailout to fund the running of the country, according to NCB Stockbrokers.

However, in a speech in Berlin yesterday, Minister for Finance Michael Noonan said: “My key message to you is that we want to move out of the EU/IMF programme and return to the markets at the earliest opportunity.

“Subject to market conditions, the NTMA plans to position itself to step up issuance at the short-end [i.e. treasury bills/commercial paper] in the second half of 2012. Ideally, and if market conditions allowed, the NTMA would hope to follow this up later with some longer-term issuance, once market access has been demonstrated. Full re-entry to the bond market would follow.”

Yet NCB economist Brian Devine said yesterday that they do not believe Ireland will be able to raise its entire 2014 funding needs without external assistance.

“Ireland is likely to receive EU assistance with its post-2013 funding needs and we believe that this is most likely to take the form of a ‘precautionary programme’ rather than a full-blown three-year programme similar to Ireland’s current package.

“Even if we are wrong on the political call with regard to Ireland being given temporary assistance rather than having to apply for a full programme, we still believe the 2014 bonds will be paid back in full,” Mr Devine said in a note.

“We find it difficult to see how Ireland will be able to issue debt at average yields at below 6%. If Ireland were to issue debt at average yields of 6%, this would then cause longer-term debt sustainability to be called into question. The negative feedback loop can easily kick in, as we have seen already during the debt crisis,” he said.

“The EFSF documentation says that the partial risk protection bond is to be used primarily under ‘precautionary programmes’ and is aimed at increasing demand for new issues for member states.

“A precautionary programme is a credit-line to a non-programme country to overcome temporary shocks and to prevent a crisis from occurring.

“Clearly, Ireland is a programme country for the life of the EFSF, which expires in June 2013,” said Mr Devine.

He said it is NCB’s assumption that Ireland will avail of the facilities available under a precautionary programme based on a political call.