NTMA sells €1bn in bonds at a third of the interest rate set in January

The National Treasury Management Agency (NTMA) sold €1 billion of 10-year bonds on Thursday – for less than a third of the market interest rate set for the exact same notes in January.

The Republic’s debt management agency sold the bonds at a price that will yield investors an annual interest rate of 0.297 per cent. The original 2029 bonds issued in January carried a yield of 1.1 per cent.

Borrowing costs on the international markets have come down sharply so far this year, as concerns over the state of the global economy have prompted investors to bet that major central banks will have to hold off on interest rate increases.

The European Central Bank, which was planning earlier this year to start raising its main rate after the summer, said last week that it would delay its first post-crisis hike until at least the middle of next year. Its main rate currently stands at a record low of zero per cent.

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The US Federal Reserve, which had led peers in increasing rates in recent years, is now widely expected to cut rates in July, as economists estimate that trade tensions will intensify and risk pushing the US into an outright recession. The chairman of the Fed, Jerome Powell, said last week that the central bank would move "as appropriate" to address risks from the US-China trade war.

The latest NTMA bond sale brings to €10.25 billion the amount of long-term debt that the agency has raised from international investors so far this year, compared with its full-year target of between €14 billion and €18 billion.

The NTMA received €2.71 billion of orders for the latest offering, underpinned by investor demand for yield and the healthy state of the Irish economy, according to traders.

"High frequency data so far in the first half of 2019 indicates that the economy remains solid and is estimated to grow by close to 4 per cent this year," said Ryan McGrath, head of fixed income strategy at Cantor Fitzgerald Ireland in a note to clients before the bond auction.

“Threats to the Irish economy are mainly external, Brexit being the most obvious. However, possibly due to inventory build there was been no evidence yet of Brexit affecting Irish exports to the UK. Inflation could potentially become the major internal concern, as wage-based inflation feeds through to price inflation,” he said.