NTMA sells €4bn in bonds to beat the European rush

The Republic sold €4 billion of bonds on Wednesday, as it sought to get ahead of an expected rush of debt issuance by other European countries in the coming weeks.

The bonds, which are due to mature in 10 years’ time, were priced to carry a coupon, or interest rate of 0.9 per cent.

The rate attached to the bonds fell slightly from initial indications on Wednesday morning, as the National Treasury Management Agency (NTMA) drew more than €14 billion of orders from international investors.

"This will be the fifth year in a row that Ireland has run a syndicated sale in early January, avoiding the issuance traffic that is likely to follow as the month progresses," said Ryan McGrath, head of fixed-income strategy at Cantor Fitzgerald in Dublin.

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Ireland is the first European sovereign to tap the bond markets in 2018. Analysts estimate sales this month could reach €100 billion amid speculation that Austria, Belgium, Finland, Italy, Portugal and Spain are considering issuing long-term bonds.

‘Maturity debt profile’

"Ireland's maturity debt profile is one of the strongest in Europe, " said Mr McGrath. "The weighted average maturity of Irish debt is 10.4 years, which compares very favourably to the euro area average weighted maturity of seven years."

While the Government aims to deliver a balanced underlying budget this year for the first time since before the financial crisis erupted in 2008, the NTMA faces €24.2 billion of debt refinancing between 2018 and 2019, with a further €18.5 billion of bonds due to mature in 2020. The agency plans to raise between €14 billion and €18 billion in the bond market this year.

Citigroup, Danske Bank, Davy in Dublin, JP Morgan, Morgan Stanley and Nomura managed the latest bond sale on behalf of the NTMA.

Frank O’Connor, director of funding and debt management at the NTMA, told reporters that an increase in the market interest rates – or yields – on long-term European bonds in recent weeks was likely to have been driven by an expected surge in issuance by countries and companies early in 2018, rather than the impact of the European Central Bank (ECB) scaling back its bond-buying programme.

Quantitative easing

The ECB decided in October to halve its monthly bond purchases under its so-called quantitative easing stimulus programme from this month, to €30 billion.

Mr O’Connor said it was “very hard to make a call” on where euro area bond yields were headed over the next year. He said that the NTMA planned to publish its first-quarter bond auctions schedule by the end of this week.

Meanwhile, Mr O’Connor said that the implementation of new European financial market rules, known as Markets in Financial Instruments Directive (Mifid II), on Wednesday meant that there was “a little bit more documentation involved” in the transaction.