NTMA raises €3bn through sale of a new 10-year bond

The National Treasury Management Agency (NTMA) has got its 2016 funding programme off to a strong start, raising €3 billion in a new 10-year bond at a rate of just over 1.15 per cent.

The bond attracted strong demand from investors, with expressions of interest in investing totalling €9.6 billion , the overwhelming majority coming from overseas investors. The funds were raised at a yield of 1.156 per cent, which the NTMA said meant there was no special premium offered to investors, despite it being a new issue.

“This is a strong start to 2016, representing half of our minimum target issuance for the year as a whole and at attractive rates for 10-year funds,” NTMA director of funding and debt management Frank O’Connor said.The NTMA would outline its plans for fund-raising for the first quarter next Monday, he said. The NTMA was keen to move into the market early in the year due to a forthcoming €8 billion bond redemption in April and also because the bulk of the exchequer’s cash financing needs comes in the first half of the year.

Mr O’Connor said today’s transaction confirms that investor demand for Irish bonds remains healthy and broad-based.Some 88 per cent of the issue was sold to overseas investors, with 32 per cent going to UK institutions, 13 per cent to Nordic countries and 11 per cent to Germany.

The NTMA could have raised more funds because of the high level of investors demand. However Mr O’Connor said that the agency wanted to continue with regular bond auctions to keep liquidity for investors – and so had restricted the amount raised to its original target of €3 billion .

It is the NTMA’s first move into the market in 2016, and follows strong increases in bond prices in the early trading days of the year. Nervousness in international equity markets has pushed money out of equities and into bonds and Irish government bond prices have benefited. In turn this has pushed down the yield, or interest rate, on these bonds, making it cheaper for the NTMA to raise new cash.

The NTMA has set a target of raising €6 billion to €10 billion in 2016 from the market. Given the approaching general election and the favourable market conditions, it had been expected to enter the market in early January, as it has done in the two previous years.

Investors have been encouraged to put money into Irish bonds due to the recent strong run of economic indicators and the impact this has on cutting our national debt burden. This has reduced the interest rate on our debt to just above French levels.

The entire market is being supported by the massive ECB bond buying programme under quantitative easing, set to continue for at least another year.

The NTMA said that the latest bond was bought largely by longer term investors, with 37 per cent bought by fund mangers, 22 per cent by banks, 17 per cent by pension funds and insurance companies and 14 per cent by central banks.