Government, corporate debt rises 6% to €969bn

The total level of Government and corporate debt was €969.2bn at the end of May, which is a 6% increase on the same month last year.

Long-term Government debt outstanding at the end of May was €115.5bn, a marginal decrease from the €115.6bn outstanding at the end of April. However, there was a 39% increase on the amount of long-term Government debt over the past 12 months.

Most of the increase stemmed from the restructuring of the €28bn in promissory notes last February. With agreement from the ECB, the Government swapped the promissory notes, which had a repayment schedule of €3.1bn every March for the next 10 years, with long dated bonds with an average maturity of 37.5 years.

At the end of May, domestic investors held roughly 44% of government debt compared with 27% for the same period last year.

Irish banks and the Central Bank hold 42% of all Irish Government debt at the end of May. This follows a similar pattern across the eurozone.

Domestic banks have been using ultra cheap liquidity from the ECB under the long-term refinancing operation programme to increase their exposure to national debt, which has tightened further the “deadly embrace” between sovereigns and their banking systems.

The NTMA issued index linked and annuity bonds over the past year in an effort to attract more Irish pension and investment funds to hold more government debt.

When the crisis erupted in 2008, government debt was 85% owned by foreign investors. When the economic meltdown escalated there was a massive sell off of Irish debt.

Roughly €21.4bn of government debt will fall due over the next three years, with roughly €12.4bn of this owned by non-resident investors.

Debt issued by private banks fell by €5.1bn in May compared with the previous month. The total amount of debt issued by Irish banks at the end of May was €74.8bn, which was a 20% drop over the 12months. There was a 32% contraction in short-term debt over the same timeframe.

The total amount of bank equity issued at the end of May was €17.8bn, a 3% rise over the past year.

The total amount of debt issued by non-financial corporates was €2.2bn at the end of May, which was a 16% drop from the previous month and 22% fall over the past year. The outstanding amount of equity issued by non-financial corporates at the end of May increased by €11.2bn to €198.6bn, up 26% over the past year.


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