NTMA weighs January bond sale in early test of market appetite

The National Treasury Management Agency (NTMA) may launch its first bond sale of the year as soon as next week in what would be an early test for the debt office amid a darkening economic outlook across Europe.

The agency may run a so-called syndicated bond sale, continuing its run of being one of the first European countries to tap international markets. While it could still decide to not proceed a sale would make it the tenth year in a row the NTMA has sold debt in early January. Twelve months ago it raised €3.5 billion in a syndicated sale.

“We expect Ireland to come with a Green bond in the 12-year to 15-year segment and the transaction will go smoothly,” said Jens Peter Sorensen, chief analyst with Danske Bank, in an emailed response to questions. “There is a positive sentiment surrounding Ireland at the moment as shown by the solid performance of Irish government bonds versus peers.”

An NTMA spokesman declined to comment.

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Ireland’s debt office plans to sell between €7 billion and €11 billion worth of bonds in 2023, it said last month, with no short term treasury bill sales planned for the year. This will be the first full year under chief executive Frank O’Connor, who took over in July.

Ireland last sold long-dated bonds four months ago. In September the agency said it would not run any debt sales for the rest of 2022, citing the strength of the exchequer’s cash position, coupled with the projected surplus for the year.

A sale this month would come against a backdrop of a looming global recession while the European Central Bank (ECB) increases interest rates to combat runaway inflation. The ECB has also ended its bond-buying programme, known as quantitative easing (QE).

Those moves have had a knock on effect on the yield or interest rate the NTMA pays to investors who buy the bonds. When Ireland sold so-called 10-year bonds in January last year it paid a yield of 0.387 per cent. By September when the NTMA last sold 10-year debt the yield had increased to 2.216 per cent. That had risen further to 2.97 per cent on the open market on Monday, broadly in line with ECB interest rate hikes.

The ECB will need to take “further monetary policy action” to curb inflation, governing council member Joachim Nagel said on Monday.

“There is a lot of issuance in the first months of the year and 2023 will be no different – so there’ll be a larger new issue premium,” Mr Sorensen said. “However, given that yields have risen so much, then investors actually get a solid coupon, and bonds are much more attractive than when in the start of 2022.

“So even though the QE is no longer there, and more rate hikes are coming from ECB, then bonds look a lot more attractive today than in the start of 2022,” he added.