Ireland not unduly exposed to post-QE interest rate rises, NTMA chief says

State’s refinancing requirement has been halved through prefunding, Conor O’Kelly says

Conor O’Kelly, chief executive, the National Treasury Management Agency .

Conor O’Kelly, chief executive, the National Treasury Management Agency .


The head of the National Treasury Management Agency (NTMA) has played down the risk to Ireland from the ending of the European Central Bank’s quantitative easing (QE) programme and the likely rise in interest rates across Europe, which will push up Government borrowing costs.

Conor O’Kelly said Ireland’s exposure to the post-QE period had been effectively cut in half through the early repayment of International Monetary Fund ( IMF ) loans and the early buyback and switching of near-term bonds, which had reduced the State’s refinancing requirement for the next three years from €60 billion to €30 billion.

“This offers signifcant insurance against the possibility of rising interest rates in the coming years,” Mr O’Kelly said at the launch of the Ireland Strategic Investment Fund’s year-end review.

The ECB is expected to end its post-crash programme of stimulus measures in September, a move that is widely seen to herald a new era of interest rate rises.

Ireland’s disproportionately large national debt makes more vulnerable to rising interest rates.

“As you might expect, in the NTMA we have been thinking about the end of QE almost since the day it began,” Mr O’Kelly said.

“Whilst we cannot predict the future path of interest rates, we have repeatedly said that we believe that the risks are asymmetric,” he said.

The agency has reduced the State’s “refinancing chimneys” over the next three years from €60 billion to €40 billion through a concentrated programme of early buybacks and the switching of near-term bonds in conjunction with the early repayment of outstanding IMF debt.

The agency has also prefunded its cash balances to the tune of €10 billion, reducing total refinancing requirements to €30 billion.

Mr O’Kelly said the agency did not feel under pressure to achieve State’s €14-€18 billion annual funding requirement for the year before September, when the ECB QE programme was now expected to end.

“We’re pretty comfortable. We’ve prefunded our requirement for 2018 already...and we have a long-term strategy in place,” he said.

He also cautioned that taking out insurance - in this case prefunding the State’s future borrowing needs - was not without costs.

“Taking out insurance isn’t a free bet, there’s a cost,” he said, noting that if the NTMA is wrong and rate stay low then Ireland will lose out.

Ireland was the first of Europe’s sovereign issuers to enter the market in 2018, issuing €4 billion of 10-year bonds earlier this month.

Mr O’Kelly said Ireland could got first and test the markert because it was - what he described as - an inoffensive issuer.

“We’re not that big so we’re unlikely to increase size if there was a lot of demand and we’re a reasonable credit to come and test the market.”