National Treasury Management Agency sale at below 1% yield

Debt issuer the National Treasury Management Agency sold €1bn of 10-year debt to investors yesterday at a yield or interest rate just below 1%, reflecting in part the worldwide flight to safety into government securities, as stock markets tumbled again.

However, Ryan McGrath, senior trader at Cantor Fitzgerald Ireland, said that there was evidence of decreased demand in the latest auction, also reflecting the extent to which investors of all asset classes have become spooked.

The NTMA sold the bonds at a yield of 0.999%, and there was €1.8bn worth of bids for the auction.

That compares with a yield of 1.15% when the agency last month sold €3bn of the 10-year bonds.

The Irish 10-year at one stage traded at 1.03%, which compares with the 0.18% yield for the German 10-year bond.

Meanwhile, the price of UK government bonds advanced, sending its 10-year gilt yield to the lowest on record, as global stock markets resumed declines and boosted demand for the relative safety of sovereign debt.

The UK 10-year gilt yield dropped 10 basis points, or 0.1%, to 1.31% at one stage.

The opposite was true in Portugal, where its 10-year government bonds plunged, pushing the yield to the highest level seen since the country exited its bailout in May 2014, and adding pressure on prime minister Antonio Costa less than three months after his minority Socialist government took office.

The security fell for a sixth day, pushing the yield up to 4.53%, the highest since March 2014.

It was at 2.3% just before an inconclusive October 4 general election and peaked at 18% in 2012 at the height of the eurozone’s debt crisis.

Mr Costa was sworn in at the end of November and plans to reverse state salary cuts faster than the previous administration proposed, while increasing indirect taxes.

The European Commission last week told Portugal to adopt measures to ensure its 2016 budget complies with the provisions of the EU’s stability and growth pact.

Gains in British gilts came after US Federal Reserve chair Janet Yellen added to caution in the markets. Global equity markets have declined $7.6trn (€6.7trn) this year.

“It’s difficult to see what breaks the trend near-term,” said Jason Simpson, a strategist at Société Générale in London.

NTMA today successfully auctioned €1bn of benchmark 10-year bond at 0.999% yield. Bid to cover 1.8 times https://t.co/zS9i4uQuo2

— NTMA (@NTMA_IE) February 11, 2016