State to return to markets tomorrow to borrow €500m
THE GOVERNMENT will tomorrow attempt to borrow money from private investors. A target figure of €500 million is to be raised.
The return to financial markets will be conducted by the National Treasury Management Agency, the State body tasked with managing the national debt.
Yesterday the agency announced it would seek to tap financial markets by issuing IOUs known as treasury bills. The bills will have to be repaid in just three months.
Investor demand for the State’s first new issuance of IOUs in almost two years will be closely watched at home and abroad. So too will the interest rate the NTMA offers in order to entice investors.
If demand is high and the interest rate low, the Government’s planned full-scale re-entry to the market will receive a considerable boost, thereby enhancing the prospects of Ireland exiting its EU-International Monetary Fund bailout on schedule next year.
The NTMA plans to increase gradually the amounts it raises at each successive auction over the remainder of the year and into 2013. The repayment duration of the IOUs it issues will also be lengthened.
Typically bonds of five- and 10-year maturity account for most government debt in developed countries, with short-term treasury bills accounting for a much smaller share.
The success of the Government’s plan to wean itself off bailout funding will depend to a considerable degree on the performance of the public finances this year and next.
New figures from the Department of Finance, published yesterday afternoon, showed the fiscal position is on track to meet targets set out in last December’s budget and under the terms of Ireland’s EU-IMF bailout.
The exchequer returns showed the deficit between public spending and revenues narrowed in the first half of the year, falling from €10.8 billion in January-June 2011 to €9.4 billion in the same period this year.
Yesterday’s figures showed tax revenue increased by more than 5 per cent in June compared with the same month last year.
Total tax revenue for the first six months of the year was up by more than 11 per cent on the same period in 2011 and 3 per cent ahead of budget-day targets.
By contrast, public spending exceeded the targets set out late last year, with the two largest spending departments (health and social welfare) accounting for the overshoots.
In a statement, Minister for Public Expenditure and Reform Brendan Howlin said: “Given the importance of meeting our budgetary targets again this year, I will continue to stress to my Cabinet colleagues the need to adhere to the 2012 spending targets.”