Short-term bonds may be issued next month


IRELAND EXPECTS to begin issuing short-term bonds as early as next month as it eases its way back into the private debt markets, according to the latest review by the EU-ECB-IMF troika.

The sixth review of Ireland’s bailout programme, which has been seen by The Irish Times, states that the Irish authorities plan to re-enter the so-called T-bills market – market conditions permitting – by issuing around €1 billion over multiple tranches.

It is expected that short-term bonds of between three and four months will be issued by the National Treasury Management Agency (NTMA) in the next six weeks. Ireland will then commence the issuance of longer-term bonds in 2013, ahead of its exit from the bailout programme at the end of the year.

In total, Ireland plans to issue more than €15 billion in fresh debt before the bailout programme comes to an end, the troika review states.

Ireland, which has been funding itself through a €67.5 billion bailout programme since late 2010 is scheduled to return to private bond markets at the beginning of 2014 when the bailout programme officially ends.

Ireland needs to raise €18.5 billion in 2014 alone to fund its deficit and repay maturing debt to avoid a second bailout.

This includes a bond redemption of €8.2 billion due in January 2014.

The troika review states that retail funding, which refers mainly to State savings in the post office network, is also expected to continue, though at a lower level than in the first quarter of this year, which saw a strong uptake from savers.

According to the report, Ireland is “on track to gradually regain market access at acceptable yields”, although it notes that “risks remain”.

The troika’s review was undertaken in mid-April.

Since then the euro zone crisis has intensified, with an inconclusive Greek election on May 6th and the sanctioning of a €100 billion bailout for Spain last weekend.

Yesterday, Spanish 10-year bond yields hit their highest level since the euro era began, touching 6.83 per cent after rating agency Fitch downgraded 18 Spanish banks.

Italian bond yields of the same maturity rose by 14 basis points to 6.17 per cent after reaching a high of 6.30 per cent.

While Irish and Portuguese bond yields have remained relatively steady over the last few days – Irish nine-year bond yields were hovering at about 7.28 per cent yesterday evening – the extra yield demanded by the market for Spanish and Italian debt signifies the challenges indebted euro zone nations face in securing private investment at sustainable yields.

In January the NTMA tested market appetite for Irish government debt when it swapped €3.53 billion worth of bonds due in early 2014 for new bonds due for repayment in 2015, effectively pushing out the repayment of the debt by 13 months.

This reduced the height of the so-called “funding cliff” due in January 2014 from €11.8 billion to about €8.2 billion.

The expected issuance of T-bills in the next few weeks will be the agency’s first issuance of new debt.