National Treasury Management Agency to sell 30-year bonds for first time

The National Treasury Management Agency is selling 30-year bonds this week for the first time.

Market participants expect the sale, which may conclude as early as today, to raise between €1.5 billion and €2 billion.

With State borrowing costs lower than ever as the European Central Bank gears up for 16 months of sovereign bond market interventions from March, the debt agency’s move marks an effort to capitalise on positive investor sentiment towards Irish debt.

The NTMA has mandated a banking syndicate – comprising Barclay’s, Citigroup, Crédit Agricole CIB, Danske, Davy and Royal Bank of Scotland – as joint lead managers for the sale.

The benchmark bonds in question will mature on February 18th, 2045. Such debt is typically issued in tranches of €1.5 billion-€2 billion.

Market conditions

“The syndicated transaction is expected to be launched and priced in the near future subject to market conditions,” the NTMA said in a statement.

The NTMA has already advised the market that it plans to raise up to €15 billion in long-term debt in 2015. Last month it raised €4 billion in a sale of seven-year debt at a yield of 0.867 per cent.

As the annual yield on Irish 10-year debt dipped below 1 per cent last month, market observers in Dublin had suggested an opportunity was opening up to sell such debt.

Goodbody chief economist Dermot O’Leary said in the wake of the ECB’s decision in January to initiate quantitative easing that the NTMA could potentially sell 30-year debt at an annual yield close to 2.2 per cent. Irish five-year yields were at that level as recently as November, he noted.

A successful sale of 30-year paper would offer several advantages, among them the establishment of a market for such bonds at a time when the NTMA faces big debt redemptions in coming years.

The issuance of such a bond would also open a window at future dates to approach investors to top up the debt. The NTMA could take an opportunity next year to sell more debt within the same bond framework, meaning debt could be issued over 29 years with redemption at the same point in 2045.