Coronavirus: State borrows €650m at cheapest ever rate for a 30-year bond

The State raised €650m at a cost of just over 0.79% - in the cheapest ever borrowing for a 30-year bond in its history as the Government prepares to borrow billions more to take account of the huge escalation in welfare and healthcare spending and the slump in its tax revenues.

The Government has to fill an exchequer deficit of up to €30bn this year - a turnaround from the small budget surplus last year - as the Covid-19 emergency crashed all previous budget calculations.

The National Treasury Management raised €650m in the auction of its existing 30-year bond which matures in 2050 at a yield or interest rate of 0.79%.

It raised a further €850m in an existing 10-year bond, at a yield close enough to zero at of 0.43%, to raise a total of €1.5bn.

It was the cheapest ever borrowing for a maturity for a conventional bond of 30 years undertaken by the State although some other ultra-long inflation-linked borrowing has been cheaper.

When first launched last year, the NTMA raised €4bn in the 2050 bond at a yield of 1.53%. The yield investors demand from eurozone governments has since tumbled.

The onset of the world recession and the slide in stock markets in March amid the Covid crisis sent investors seeking out the safety of European sovereign bonds, even paying negative rates to some governments for the privilege of holding their money.

The €850m raised in the 10-year bond yesterday was, however, not the cheapest ever tapped by the State.

That occurred in March when investors and banks across the world handed the Irish State €1bn in free money as the NTMA sold the debt at a negative interest rate of 0.15%. Investors accepted negative interest rates on the day that the huge fallout to the world economy from the Covid-19 health emergency was beginning to emerge.

The additional €1.5bn it raised yesterday means the NTMA has so far raised €12.5bn in benchmark bonds this year.

The debt agency needed to almost double its funding requirement to up to €24bn this year after the Government’s budget gap opened up amid the health emergency. Its costs have increased hugely after unemployment and Covid and wage-support payments soared to almost 1.3 million.

Meanwhile, consumer prices edged lower by 0.1% in April - the first annual price fall in two years, according to CSO figures. Private rents fell by 1.8% in April from March but were still 0.8% higher than in April 2019, the figures show. Local authority rents were unchanged in the month and were 6.2% higher in the year. Mortgage interest prices were also unchanged in the month but were 2.6% higher than a year earlier.

The figures also show that pharma and medical products climbed 1.4% in the month and were 2.8% more expensive than in April 2019. Car insurance prices fell 2.2% in the month and are 6.3% below April 2019 levels, the CSO figures show.