State sells €600m of treasury bills

Thu, Aug 26, 2010, 01:00

The State sold €600 million of treasury bills this morning, two days after the country's credit rating was cut by ratings agency Standard and Poor's.

The National Treasury Management Agency (NTMA), the organisation which manages the State’s debt, sold €200 million of securities due February 14th, 2011 at an average yield of 1.978 per cent, compared with 2.458 per cent in an August 12th sale.

The agency also sold €400 million of April 18th, 2011 debt at an average yield of 2.348 per cent, compared with 2.81 per cent previously.

Total bids were received for €3.7 billion with a bid-to-cover ratio of 6.1 times, the NTMA said.

NCB economist Brian Devine said the bid to cover ratios were healthy, but the spread of 184 but the more encouraging thing is that fact that the spread over the Euro benchmarks curve was 184bps recorded today was more encouraging, as it compared to 238bps at the time of the last auction.

"These are, however, still expensive rates for the Irish government to pay on such short term funds. With German yields grinding lower, it is hardly surprising that there is healthy demand for yield within the same currency zone," he said.

Mr Devine said the uncertainty surrounding Anglo has weighed on sentiment, as had "old news being churned up as new news". He said NCB was viewing September as the watershed month, with the EU decision on Anglo’s restructuring plan is due to be released.

"The focus can then shift to the economic and political risks surrounding deficit/debt sustainability as the driver of spreads as opposed to the banking sector," he said.

The next Treasury Bill auction will take place on September 9th.