NTMA sells €500m worth of bills in bond auction

The National Treasury Management Agency (NTMA) has successfully completed its latest short-term bond auction, with €500m worth of treasury bills sold at a marginally improved interest rate.

The sale of the ‘T-Bills’ — which will mature in September — marks the sixth consecutive month the NTMA has conducted such an auction and is part of an ongoing plan to keep Ireland active in the markets ahead of the planned exit from the troika bailout programme later this year.

Yesterday’s auction saw total bids amount to €1.46bn, nearly three times the amount on offer. The bills were sold at an annualised interest rate, or yield, of 0.2%; up slightly on the 0.129% yield seen in May’s ‘T-Bill’ auction.

This week’s announcement, by the US Federal Reserve, to reduce its “quantitative easing” activity before the end of this year has had the general effect of increasing global bond yields.

However, yesterday’s bid-to-cover ratio was quoted at 2.9x; down from 3.6x last month. The b/c ratio measures demand for securities; with higher ratios illustrating greater demand.

But, according to Owen Callan — senior analyst with Danske Bank Markets — the slightly lower demand rate was not unexpected and Ireland is still faring better than most of its eurozone counterparts in the bond markets, at present.

“This morning’s slightly lower issue levels and bid-to-covers are not unexpected, given the rather volatile and negative reaction to the FOMC [the Federal Open Market Committee; which is basically the US version of the NTMA] last night; as well as the more general sell-off in fixed income, credit markets and risk generally, over the past month,” Mr Callan said.