State to pay less than zero rate on €4bn in bonds

The Republic will pay less than a zero per cent rate on €4 billion of bonds it sold on Wednesday to help refinance the country's remaining International Monetary Fund (IMF) debt as well as bilateral loans from Denmark and Sweden as part of its international bailout.

The five-year bonds were priced to carry a yield of -0.008 per cent. It marks a record-low rate for new bond issuance by the National Treasury Management Agency (NTMA), reflecting the ongoing impact on euro-zone bond yields as a result of the European Central Bank's €2.3 trillion bond-buying programme, known as quantitative easing, which is designed to boost inflation and growth.

The transaction attracted more than €10 billion of orders from potential investors and was managed by BNP Paribas, Citigroup, Davy, Goldman Sachs, NatWest and Société Générale.

The planned transaction follows on from the Government’s announcement early last month that it planned to execute an early repayment of its remaining €4.5 billion of IMF bailout loans as well as €1 billion given to the State in 2010 by Denmark and Sweden.

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The move, however, depends on all European Union states agreeing to waive the right of two EU bailout facilities, which gave Ireland €40.2 billion during the financial crisis, to seek early repayment at the same time.

“Today’s transaction allows us to refinance the IMF and bilateral loans while maintaining our strong cash balance,” said Frank O’Connor, head of funding and debt management at the NTMA.

“This has the advantage of maintaining flexibility around our future funding requirements and taking advantage of debt service cost savings made possible by the current low interest rate environment.”

The NTMA was sitting on about €20 billion of cash and liquid assets at the end of August.

At the end of September the NTMA had issued €10.5 billion in benchmark bonds, from its stated funding range of €9 billion to €13 billion. However, the agency said on Monday that fundraising to help repay bailout loans may tip the full-year figure above €13 billion.