NTMA pulls back from debt market for rest of year amid budget surplus

The National Treasury Management Agency (NTMA) has decided not to carry out any further bond sales this year, as the Government is set to record a budget surplus and as borrowing costs in financial markets have jumped in recent months.

The State’s funding and debt management agency had originally planned to issue between €10 billion and €14 billion of bonds this year, following on from a Department of Finance forecast this time last year that the there would be a budget deficit of €7.7 billion this year. The NTMA had issued €7 billion of bonds as of earlier this month.

However, Minister for Finance Paschal Donohoe said on Tuesday, as he unveiled Budget 2023, that there would now be a general government surplus of €1 billion this year, driven by much higher than expected corporate taxes. He predicted that the surplus would rise to €6.2 billion next year, even after unveiling a €11 billion giveaway budget to help households and businesses deal with the cost-of-living crisis.

NTMA chief executive Frank O’Connor said that the decision to step away from the debt markets for the remainder of the year also reflected the agency’s strong funding position, with €20 billion of cash balances.

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“The exchequer position has been strengthened further by yesterday’s Budget 2023 announcement showing a surplus for this year versus the forecast deficit of €7.7 billion in Budget 2022,” he said.

“We continue to have significant flexibility in meeting Ireland’s future borrowing requirements and will resume long-term debt issuance from a position of considerable strength in early 2023.”

Borrowing costs have jumped on global debt markets so far this year as the world’s largest central banks have started to hike interest rates to rein in soaring inflation. The yield, or market interest rate, on benchmark Irish Government 10-year bonds has jumped to almost 2.9 per cent from 0.22 per cent at end of 2021.

“In contrast to the rest of Europe, the Irish exchequer borrowing requirement is now negative,” said Ryan McGrath, head of bond strategy and sales at Cantor Fitzgerald Ireland.

“The outright level of general government debt is assumed to have peaked as the Government is not expected to have to finance a deficit in the coming years. Debt levels are forecast to have fallen from €235 billion in 2021 to €225 billion in 2022 and €224 billion in 2023,” Mr McGrath noted.