NTMA debt sale strengthens Government’s position in repaying IMF loans

The National Treasury Management sold short-term debt today at a low interest rate, strengthening the Government’s position as prepares to repay IMF debts in coming days and again in the new year.

The NTMA sale of six-month Treasury Bills came as Sweden’s cabinet gave its permission for the Government to pay up to €10 billion of its IMF debt next week or the week after.

“There are real and tangible benefits to Ireland from this transaction, and I would like to take the opportunity to thank Sweden for their continued support for Ireland,” said Minister for Finance Michael Noonan.

The Government expects to follow that transaction with preparations in January to pay off a further large tranche of the €22.5 billion IMF debt.

While this will necessitate a return to private bond markets to raise more debt, the NTMA’s sale of €500 million in Treasury Bill was well-received by the market. The NTMA typically issue short term paper with a maturity of three months.

Interest rate

The annualised interest rate was 0.044 per cent on the six-month bills, meaning the Government will pay €110,000 interest before the debt is repaid next May. The sale was oversubscribed by a factor of 3.75, meaning investors were willing to lend €1.875 billion to the NTMA.

This is perceived to augur well for the next auction of long-term for the purposes of the early IMF repayments.

Earlier this month the NTMA raised €3.75 billion in 15-year bonds , the first time it has issued debt of this maturity since 2009. The debt was issued at an interest rate of 2.487 per cent, the lowest level ever for Irish 15-year bonds.

Sweden’s approval was required in light of its €600 million bilateral non-euro zone loan to Ireland at the time of the EU/IMF bailout. Britain and Denmark, both non-euro countries, also provided bilateral loans .

Noonan welcome

“I welcome the Swedish Parliament’s decision to agree to the waiver for Ireland’s proposed repayment of a portion of its IMF loan and the confirmation by the Swedish Government that was provided today. We have already received confirmation of waivers from the UK and Denmark,” Mr Noonan said.

“Our EU and bilateral lenders have been very supportive of the government’s objective of improving Ireland’s debt sustainability since I discussed this issue with them in early September.

“Significant progress has been made on this project since agreement in principle was secured at the informal Ecofin in Milan in September to replace expensive IMF loans with cheaper, low cost market funding.”

The Government plans to repay more than €18 billion of IMF loans ahead of schedule. The remainder of the IMF debt would not be paid off early as the relevant rate of interest - just above 1 per cent - is lower the than current market rate.