NTMA has to offer highest rate in nine years to sell long-term bonds

The National Treasury Management Agency (NTMA) had to offer the highest interest rate in nine years to investors to sell long-term bonds on Thursday, against the backdrop of rising borrowing costs globally as central banks keep up the fight against inflation.

The agency sold €800 million of bonds that are due to mature in 2037 to carry a market interest rate, or yield, of 3.37 per cent. That was the highest rate the NTMA has had to pay since it sold 10-year bonds in early 2014 at a 3.54 per cent rate.

Thursday’s bond auction also saw the NTMA sell €450 million of 10-year bonds, priced at a yield of 3.13 per cent, marginally higher than the 3.11 per cent rate it paid in January to get 20-year so-called green bonds away.

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The NTMA, led by chief executive Frank O’Connor, has now raised €4.75 billion in the bond markets so far this year, equating to almost two-thirds of the lower end of the €7 billion-€11 billion fundraising target it has set itself for 2023.

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Latest euro zone inflation figures suggest ECB will move slowly on rates

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Bets by debt market investors on the pace at which the European Central Bank (ECB) will hike official rates to rein in inflation have seen the market interest rate on Ireland’s existing 10-year bonds rise from 0.25 per cent as of the end of 2021 to 3.16 per cent currently. The ECB, which has moved its key deposit rate from minus-0.5 per cent to 2.5 per cent since last July, is on track to add another half-point to official borrowing costs when its governing council meets next week.

ECB chief economist Philip Lane signalled in Dublin this week that the bank would continue to raise interest rates beyond March.

“The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting,” he told an event in Trinity College Dublin on Monday.

The “exact calibration” beyond March would depend on the ECB’s new economic forecasts, which come out next week, and on incoming data, he said.