NTMA auctions €750m of debt at near record low rate of -0.58%

Agency’s latest auction was 2.5 times oversubscribed

The National Treasury Management Agency (NTMA) has sold a further tranche of shot-term debt worth €750 million.

The Treasury Bills, with a maturity of five months, were sold at a yield of -0.58 per cent, one of the lowest rates of return ever offered on Irish government debt. It means creditors are paying the Government here to lend to it.

Despite the negative return, the NTMA said the auction was 2.5 times oversubscribed, meaning it received €1.8 billion in bids.

The State’s debt managing agency expects to raise up to €20 billion in the bond markets this year to cover the expected budget deficit triggered by pandemic spending. It raised a significant portion of this – €5.5 billion – in a 10-year bond sale in January.


It has held a few smaller auctions since, including three this month without troubled stockbroker Davy.

The NTMA withdrew Davy’s mandate to act as a primary dealer of Government bonds earlier this month, due to a bond-trading scandal dating back to 2014.

Europe’s government bond yields rose this week, tracking the pick-up in US yields as markets focused on uncertainty about the outlook for inflation.

Temporary blips

European Central Bank (ECB) president Christine Lagarde said that the central bank will not respond to temporary blips in inflation and will prevent a rise in yields if they get ahead of the economic recovery.

Richard McGuire, rates strategist at Rabobank, said that the ECB was a "passenger" in the reflation story, because Europe does not have the fiscal stimulus that is being delivered in the US or the UK's pace of vaccine rollout to justify a move higher in yields.

“In an environment of rising yields, of rising rates, then Europe is always likely to lag the US and the UK,” he said, adding that that is why the ECB is more dovish than the Bank of England and the Fed. – Additional reporting: Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times