The National Treasury Management Agency will attempt to raise a few hundred million euro in an amortising bond over the next couple of days.
There had been speculation that the NTMA was looking to raise over €1bn in its initial amortising bond issue, but sources close to the situation say that the first issue will be in the region of “hundreds of millions”.
The NTMA recently flagged that it would look to raise between €3bn-€5bn in amortising and inflation linked bonds over the next 18 months. Amortising bonds are particularly attractive for pension funds as they make interest and principle repayments every year over their lifetime. Irish pension funds currently hold a very low level of Irish government debt.
It is believed that the NTMA is planning a “tap issue” for the amortising bond, which means that it will make further issuances of this particular type of bond.
Irish government bond yields dropped below 6% in trading yesterday on the back of improved sentiment in the eurozone.
It is looking increasingly likely that the ECB will take bold measures to ease pressure on beleaguered eurozone members, particularly Spain and Italy. The ECB president Mario Draghi said last month that “the ECB would do whatever it takes to preserve the euro”.
It will be the ECB’s next meeting at the beginning of September before it will be known what action it will take, but it is believed that it will buy up large swathes of short term debt of periphery eurozone debt. Spain would have to agree to certain conditions in order for the region’s rescue fund, the EFSF, to buy 10-year Spanish debt and ease pressure over the longer term.
The Bundesbank remains implacably opposed to the ECB buying up eurozone debt on the basis that it will stoke inflationary pressures. But Goodbody Stockbroker economist Dermot O’Leary says that Bundesbank is isolated in its approach. “Most of the members of the ECB as well as [German chancellor] Angela Merkel have supported Draghi,” said Mr O’Leary. “The Bundesbank might be just playing to a domestic political agenda.”
Ireland’s efforts to make a full return to the markets will depend on whether the Government is successful in its efforts to get a deal on bank debt. It will be the EU summit in October before this is known.
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