Cantillon: NTMA’s low-key €7.3bn bond repayment

Remember the national handwringing about how we were going to keep the lights on and repay €12 billion of government debt after Ireland exited its international bailout a little over two years ago?

Every briefing by the National Treasury Management Agency to investors, politicians and journalists was dominated by how we were going to get over the January 2014 funding cliff .

It prompted the NTMA to carry out a series of nifty market manoeuvres as it sought to cut the amount owing on the day. By the time of payback day, the €12 billion bill had been whittled down to a fraction of its original size. Moody’s, the ratings agency was impressed with the country’s newfound ability to meet its dues, lifting the country’s creditworthiness out of its “junk” bucket to “investment grade”.

Fast forward to yesterday, and the NTMA’s biggest bond repayment since then – almost €7.3 billion – passed with barely a raised eyebrow. Of course, Ireland and the rest of the euro area have since been benefiting from the ultimate bailout: ECB president Mario Draghi starting up the money printers and cutting official interest rates to zero.

Under its bond-buying programme to push down borrowing costs and re-stoke inflation, the ECB is set to buy more than €10 billion of Irish government bonds this year. That’s more than the maximum amount of new debt the NTMA plans to sell this year.

With the yield on Ireland’s benchmark 10-year bonds having fallen from about 3.5 per cent in January 2014 to 0.85 per cent now, even the almost €50 billion of bonds maturing over the next four years looks more manageable. This is helped by the State’s expected return to a balanced budget as early as next year.

This, however, is of little comfort to the number crunchers at Moody’s. They have indicated on a few occasions they’re unlikely to move Ireland up to the A-club at which rivals Standard & Poor’s and Fitch rate Ireland until it sees the colour of the budgetary stance of the next government. Whenever that’ll be.