Ireland to sell €1bn in bond markets ahead of election

The National Treasury Management Agency (NTMA) said on Monday that it will sell some €1 billion in 10-year bonds on Thursday, February 11th.

The auction of the 1% Treasury Bond 2026 will be confined to primary dealers, with a non-competitive auction for 15 per cent of the amount sold in the competitive auction to follow. This will close by 10 am on Friday. Given that it is already fully funded for 2016, the bond auction is expected to be the NTMA’s only fund-raising during the first quarter, apart from a March issue of short-term Treasury notes.

Last month the NMTMA sold € 3 billion of the 2026 bond at an interest rate of 1.15 per cent. The new benchmark 10-year bond was trading at about 1 per cent on Monday, at a spread of 70 basis points to Germand bunds and ahead of the 2025 bond which was trading at a yield of 0.85 per cent. In comparison, Portuguese 10-year bonds were yielding 2.93 per cent and Spanish 10-year bonds 1.63 per cent.

Alan McQuaid, chief economist with Merrion, said that there has been a bit of a sell-off in Irish bonds of late.

“They have been a bit weaker in the last while, because of political uncertainty,” Mr McQuaid said, adding that the last thing markets want is a hung parliament as a result of the forthcoming election.

“The risk is that an uncertain election outcome, such as a hung parliament or a more leftist slant to the next government would weigh on yields and would push them higher,” he said.

On Friday, Fitch upgraded Ireland to “A”, but fellow ratings agency Moody’s has yet to do so. Also last week, US bond investor Michael Hasenstab of the Franklin Templeton fund, who bought 10 per cent of the Irish bond market after the State was bailed out, said he had exited his Irish position.