The National Treasury Management Agency (NTMA) has hired a group of banks and securities firms to sell about €3 billion of 10-year bonds to get the ball rolling on its debt-raising efforts for the year, according to market sources.
The transaction is expected to be launched on Thursday, they said. They commented after the NTMA said in a statement that it had hired BNP Paribas, Cantor Fitzgerald Ireland, Citigroup, Danske Bank, JP Morgan and Morgan Stanley to manage a sale of 10-year bonds, without giving a planned size of the transaction.
The new notes are expected to carry an interest rate of about 0.35 per cent, market sources said.
The NTMA has typically raised more in its year-start bond sale than initially signalled by market sources, taking advantage of investors demand for new debt before a slew of other governments come to market.
The agency outlined last month that it aims to raise €10-€14 billion in international bond markets in 2022, marking a decline of up to 46 per cent on the amount raised last year as the Government’s Covid-related spending eases.
It sold €18.5 billion of bonds in 2021, on top of €24 billion issued in 2020, as the Government grappled with the costs of funding supports for households and businesses during the worst of the economic shock.
The Republic had been among the first euro-zone sovereigns to tap bond investors every year since it returned to capital markets in mid-2012, when it was in the middle of an international bailout programme.
However, this year it has slotted into an orderly queue that has seen the likes of Italy, Spain and Portugal dip into the market before it, following a spike in the market interest rates, or yields, on euro-area government debt after the European Central Bank decided on December 16th to wind down its €1.85 trillion pandemic bond-buying stimulus programme by the end of March, amid a spike in inflation.
The yield on Ireland’s current 10-year bonds have since risen from 0.05 per cent to almost 0.38 per cent earlier this week. The NTMA sold similar bonds a year ago to carry a negative rate of almost minus 0.26 per cent.
Still, government bond yields eased back globally on Wednesday amid investor relief that a key US inflation reading came in line with expectations. While the data showed that US inflation was running at an annual rate of 7 per cent in December, the highest in almost 40 years, it was in line with market expectations.
“The [inflation] number is itself impressive, it hasn’t been seen since the early ’80s, but it was expected. The market has moved immediately so there were probably expectations that it would come out even stronger,” said UniCredit strategist Luca Cazzulani.
Portugal raised €3 billion through a new 20-year bond on Wednesday with solid demand from international investors despite an unstable political situation as the country heads for a snap election at the end of the month.
Demand for the new notes reached €20 billion, or 6.7 times the amount of the bonds on offer.
Portugal is three weeks away from a snap election, which was called after the two former allies of the ruling Socialists, the Communists and the Left Bloc sided with right-wing parties to reject the minority government’s budget Bill.
Political analysts say the election alone might not solve the political impasse as no party or workable alliance is likely to achieve a stable majority, potentially undermining the country’s ability to spur growth using European Covid-19 recovery funds. – Additional reporting: Reuters