State’s first bond deal of year most popular ever

The State’s first bond issuance of the new year was the most popular Irish syndicated bond sale ever, attracting a total order book of some €18.1 billion, the largest ever received.

The level of interest indicates strong support from both Irish and international investors in the sovereign ahead of next week’s crunch vote on UK prime minister Theresa May’s Brexit agreement.

On Wednesday, the National Treasury Management Agency (NTMA) beat expectations by raising €4 billion in a syndicated sale of a new 10-year benchmark treasury bond maturing in May 2029.

The guidance heading into the auction was that the agency would raise €3 billion, but the bond was heavily over-subscribed, with a total order book at over €18.1 billion – the largest ever received by Ireland for a syndicated bond sale. It was considerably above the previous €14 billion order books for bond deals in January, 2014 and 2018. The funds were raised at a yield of 1.123 per cent, which compares with 0.94 per cent in 2018 and 1.15 per cent in 2016.

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Target

NTMA director of funding and debt management Frank O’Connor said the deal was an “encouraging start” to its 2019 issuance programme, noting that by raising €4 billion, the NTMA has already raised about 25 per cent of the mid-point of its target of €14 to €18 billion for the year.

“This level of demand, coupled with cash balances of more than €15 billion entering 2019, leaves us well placed to meet the maturities that will arise during the year and to continue our strategy of prefunding to meet future redemptions. This gives us flexibility in our issuance activity and increases our ability to borrow on attractive terms and to continue to diversify our funding,” he said.

Last year the NTMA raised €17.25 billion, with an average maturity of 11.8 years and an interest rate of 1.07 per cent.

According to the NTMA, the book for Wednesday’s deal comprised over 180 individual accounts, and the vast majority of the orders came from European based investors (91 per cent), with Ireland accounting for the largest proportion at 22 per cent, followed by Germany at 19 per cent.