Government to borrow up to €4bn today on the markets

THE Government is to borrow between €3bn and €4bn on the bond markets today, the Irish Independent understands.

Plans for a bond sale were announced yesterday by the National Treasury Management Agency (NTMA), but the agency did not specify the size of the sale and said only that it would take place “in the near future”.

Bond yields are at historic lows so the sale will result in cheap funding for the Irish taxpayer over the next seven years, according to Cantor Fitzgerald Ireland’s head of fixed income strategy, Ryan McGrath.

“The NTMA are availing of the positive European bond sentiment in the run up to the ECB meeting, where it’s anticipated that they’re close to launching a sovereign bond-purchasing programme,” Mr McGrath said.

The NTMA said last month that it wants to issue €12bn-€15bn of Irish bonds this year. It said it will issue a statement at the beginning of each quarter outlining its auction plans for that quarter.

“We had expected that the agency would come with new issuance in early 2015 given both past form (it has announced bond sales in the first month of each of the past three years) and its intention to redeem another €9.5bn of expensive IMF loans to reduce the costs of servicing the general government debt,” Investec Ireland economist Philip O’Sullivan said in a note circulated yesterday.

Last year this country repaid €9bn of IMF loans early, saving over €750m in interest payments over the loans’ lifetime.

“We had thought that the agency might wait another two weeks before pressing the button on this sale, given that Moody’s will publish its next scheduled review on the Sovereign on January 16, which provides a possible catalyst for pricing to tighten further before launching a new bond,” Mr O’Sullivan said.

“If Moody’s does upgrade Ireland once again this month (note that it raised its rating on the Sovereign by a cumulative three notches during 2014) this will undoubtedly give a lift to the secondary market performance of the new issue, which will help reinforce the already bullish sentiment ahead of the next sale,” he added.

A bond sale would also help to counter perceptions that there is a lack of Irish bonds being traded in the market, said John Taylor, a fixed income portfolio manager at asset manager Alliance Bernstein.

Moody’s, Standard & Poor’s and Fitch say the outlook for Irish bonds is stable.

The bonds being issued will mature in March 2022 and Barclays, Davy, HSBC, JP Morgan, Nomura and RBS will be joint lead managers for the sale.

Article Source: