NTMA sticks to plan as yields tumble

Ireland doesn’t need to jump in to tap sovereign debt markets even as yields have tumbled following the shock decision of the UK to leave the EU, the head of the National Treasury Management Agency has said.

Chief executive Conor O’Kelly said the fall in interest rates on Government bonds did not signal any “cataclysmic” outcome after Brexit, while the liquidity provided by central banks was helping markets to a great extent.

Mr O’Kelly said the NTMA was unlikely to change its plans this year for bonds issuance in light of the lower yields.

With Minister for Finance Michael Noonan, he told reporters at the launch of the agency’s annual report, that markets in time would move back to assessing the fundamental issues of economies.

The agency had issued €6bn in debt ahead of the UK vote, and, while Brexit would overall be a negative for the economy here, it would be difficult to calculate the full effects until Britain formally started its negotiations to exit the EU.

The debt agency is happy with the so-called profile of Ireland’s debt but the Brexit vote was a reminder that small indebted economies have to be always vigilant in assessing potential risks at home and abroad, Mr O’Kelly said.

The agency had already taken the opportunity to lock in the lower interest rates by issuing the State’s first 20-year bond, he said.

Yields have dropped sharply since the June 23 vote, as investors fled to safety, and central banks pumped in liquidity to markets, analysts have said.

The benchmark Irish 10-year yield has dropped to 0.45% from 0.76% since before the vote, while the yield on the UK 10-year gilt has tumbled to 0.80% from 1.37%.

Mr O’Kelly said that bond investors understood the factors driving the huge revisions in the country’s GDP numbers for 2015, which showed the economy here supposedly surged by over 26% last year, adding that they look at other indicators to measure the Irish economy. There was “no negative” reaction by bondholders to the revised GDP figures, he said.

“Capital markets have been volatile in the wake of the UK referendum result, and it will take time before we can properly assess the long-term impact on Ireland’s credit spreads,” the NTMA said.

“However, Ireland’s funding position is strong,” it said.

Mr Noonan said he hoped to establish a good relationship with the new UK chancellor Philip Hammond.

Speaking warmly about George Osborne, he said the former chancellor had been a good friend to Ireland during the crisis years.

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