NTMA completes 2023 fundraising before latest ECB rate hike

The National Treasury Management Agency (NTMA) raised €1 billion in a bond auction on Thursday to complete its long-term debt raising for the year just hours before the European Central Bank (ECB) raised official interest rates for the 10th time in a row.

Following the latest auction, the Irish debt-management agency has raised €7 billion through the sale of benchmark bonds this year.

It had set out at the start of 2023 to raise between €7 billion and €11 billion this year, but decided in July to bow out of the markets early for a second straight year as the Government’s finances proved to be stronger than originally anticipated.

The NTMA sold an average of about €16.5 billion of bonds a year between 2014 and 2021, including large issuances during the Covid-19 pandemic.

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The Government currently forecasts that its general surplus will rise from €8 billion last year to €10 billion this year and almost €12 billion in 2024, driven by windfall corporate tax receipts from multinational groups with operations in the State.

On Thursday, the NTMA sold €500 million of bonds that are due in May 2027 and a further €500 million of notes that are scheduled to mature in 2045. The 2024 bonds were priced to carry a market interest rate, or yield, of 3.46 per cent.

The yield on the Republic’s benchmark 10-year bonds currently stands at 3.03 per cent, up sharply from a level of 0.21 per cent at the end of 2021, before central banks globally started to hike rates to try to combat inflation.

The ECB governing council decided on Thursday afternoon to raise its key rate by 0.25 of a percentage point, lifting its deposit rate to an all-time high of 4 per cent. This rate had stood at minus 0.5 per cent in July last year, before the ECB started its cycle of tightening.

Financial markets had seen unchanged rates as the most likely outcome of the latest meeting only days ago, but expectations shifted towards in recent days.

Economists now largely expect the latest hike to be the ECB’s last of the current cycle, and now anticipate a lengthy pause, followed by rate cuts in the second half of next year.