NTMA to auction €1.5bn of bonds

THE National Treasury Management Agency will auction €1 billion to €1.5bn of bonds on February 16 as part of its regular funding programme, it said yesterday.

In January it raised €6.5bn in two auctions.

That represented a third of Ireland’s €20bn borrowing requirements for this year, which the NTMA will raise though a series of auctions to be held on the second Tuesday of every month.

Despite the present market turmoil surrounding Greece the upcoming bond issue should achieve its target, said Alan McQuaid chief economist, Bloxham Stockbrokers..

“They might have to pay a higher price than they would like, but the markets are still well disposed towards Ireland,” he said.

For some time the spread between German bunds and the cost of fund raising for Ireland has been narrowing.

At present the difference is 1.46% and that has fallen steadily since the Irish Government in recent budgets has cut spending and raised taxes to get its deficit back down to 3%.

McQuaid said also the doubts about Greece and the fears over other EU states, such as Portugal and Italy will lead to a “weaker euro”.

That will be good for European trade and help to reverse the difficulties current facing many EU states at this stage, he said.

If Greece fails to “rise to the challenge” and cut its borrowing it could be “backed out of the euro”, but that was a difficult process and “an unlikely scenario”, he said.

The most likely outcome is that Europe will have to become “more federal” in where definite borrowing guidelines be set out and states fully comply with what’s laid down.

The current difficult situation makes it clear that Europe needs an authority at the centre “controlling what’s going on in the member states”, he said.

In the uncertain environment it was imperative the Government continues with the correct fiscal austerity measures to tackle the budget deficit.

Mr McQuaid said Ireland was “better positioned” than many of the other states who face mounting challenges over their borrowing difficulties.

He added “a key theme” for bond markets over the next decade will be public-sector retrenchment throughout the entire G7 world.


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