Government accelerates €10bn IMF loan repayment

The Government could pay back €10bn of the IMF bailout loans by the end of this year, according to Taoiseach Enda Kenny.

Speaking to Bloomberg TV at the Dublin Web Summit, Mr Kenny said he was confident €10bn could be repaid compared with an original target of €6bn.

The NTMA raised a further €3.75bn yesterday through a 15 year bond at a yield of 2.487%. Demand for the issue reached €8.4bn with interest coming from 250 accounts, including fund managers, pension funds, insurance companies, banks, and other investors. This is the first 15-year bond issued by the NTMA since 2009. Moreover, the yield is a historical low for a bond with this maturity.

However, Goodbody Stockbroker economist Dermot O’Leary said the price and demand for the bond, “slightly disappointed at the margin”. Coverage of the 15-year bond was 2.24 compared with much higher demand for previous 10-year issues over the course of this year, noted Mr O’Leary.

Nonetheless, the NTMA remains in a very strong position to continue paying down the IMF loans, he added. It has a cash balance of roughly €24bn. If the €10bn is repaid at the end of this year, the agency will have €14bn in cash balances facing into 2015 with just one redemption of €2.2bn in February.

The Government could make up to €2.1bn of savings through the early repayment of €18bn IMF loans. These loans were drawn down at an average interest rate of close to 5%. Since exiting the bailout programme, Irish sovereign borrowing costs have tumbled to record lows. It is unlikely that any Ireland specific event will trigger a blow out in bond yields, said Mr O’Leary.

The biggest danger to borrowing costs across the eurozone stems from a political and economic risks in France and Italy, he added.

“The strong demand from investors globally for this longer dated bond, our first 15-year maturity since 2009, demonstrates that Ireland has consolidated and enhanced its market access since making a successful return to the international debt markets earlier this year,” said NTMA chief executive John Corrigan in a statement.