NTMA hits top end of range with €1.25bn bond sale

The National Treasury Management Agency (NTMA) raised €1.25 billion in the debt market on Thursday, hitting the upper end of the range it had set earlier in the week, as European bonds rallied from a recent sell-off.

The State’s debt office sold €600 million of bonds that are due to be repaid in 2022, and a further €650 million of securities that mature in 2026.

It marked the first time the NTMA auctioned two bonds in the same day since 2010, and means that agency has now raised €5.25 billion out of its target of issuing between €9 billion and €13 billion of debt for the year.

The sale took place against the backdrop of a broader rally across European bonds as a result of easing concerns about political risk posed by elections in the coming months in the Netherlands, France and Germany.

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The yield on the Republic’s benchmark 10-year bonds, which had surged from 0.32 per cent in September to a 15-month high of 1.215 per cent on Monday, had fallen back to 1.02 per cent by mid-afternoon trading on Thursday.

The 2022 bonds sold by the NTMA on Thursday were priced to carry a market interest rate, or yield, of 0.088 per cent, while the 2026 bonds were priced at 1.026 per cent.

More attractive

The overall rise in bond yields since September has served to make the Irish 2022 bonds auctioned on Thursday more attractive. These bonds had carried a negative interest rate – meaning investors were paying the government for the privilege of holding their money – for much of the past seven months. The yields peeped back into positive territory last month.

Aside from various national elections across Europe over the coming months, financial markets currently have to contend with the UK’s negotiations to exit the European Union and speculation that the European Central Bank will outline plans this year to wind down its €2.3 trillion bond-buying programme, known as quantitative easing (QE).

As a sign of investor nervousness, France’s government-linked development agency, Agence Francaise de Développement, postponed a $1 billion (€0.94bn) bond sale this week, citing market volatility.

Voter support

French 10-year bonds widened to yield the highest premium versus German notes since 2012 this week as corruption allegations against the establishment presidential candidate Francois Fillon threatened to shift voter support to anti-euro candidate Marine Le Pen.

“There’s a lot of known political risk in Europe this year,” said Roger Webb, a London-based investment director at Aberdeen Asset Management.

“We shouldn’t be surprised if there are periods during the year when deals get pulled because the underlying government bond market is particularly volatile.” – (Additional reporting: Bloomberg)