NTMA sees State’s interest rate falling to 1.5%

ECB buying up most debt issued to deal with Covid fallout

National Treasury Management Agency (NTMA) chief executive Conor O'Kelly said on Wednesday that the interest rate on government borrowing will fall to a record low of 1.5 per cent this year as the European Central Bank (ECB) buys most of the debt being issued to deal with the economic fallout from Covid-19.

The overall interest bill will come to about €3.5 billion, Mr O'Kelly told an online conference hosted by the Ireland Strategic Investment Fund, which falls under the NTMA, for companies and projects in which it is invested and co-investment partners.

This bill is less than half the almost €8 billion of interest paid in 2013 as the State was exiting an international bailout programme.

Since the onset of the coronavirus crisis last March the NTMA has issued €35.8 billion of bonds, at an average interest rate of 0.16 per cent, to bridge a budget deficit as the Government funded household and business supports.

Over 70 per cent of these have been subsequently bought up in the secondary bond market by the ECB under an extraordinary stimulus programme. Many economists and debt traders expect the ECB’s governing council to discuss on Thursday the prospect of the easing of its pandemic-era monetary stimulus as recent economic figures point to soaring inflation and solid economic growth.

Meanwhile, the NTMA is aiming to raise between €1 billion and €1.25 billion in a bond auction on Thursday.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times