State borrows €500m at close to record low interest rate

Investors who hold treasury bills to maturity will pay Government for doing so

The low interest rate reflects a sharp fall in longer term interest rates on international money markets this week. Photograph: iStock

The low interest rate reflects a sharp fall in longer term interest rates on international money markets this week. Photograph: iStock

 

The Government has raised €500 million in one-year borrowings at an interest rate of minus 0.47 per cent, just above the record low for such funding.

The National Treasury Management Agency announced that the money was raised on Thursday morning via an auction of treasury bills to investors.

The low interest rate – which sees investors who hold the bills to maturity paying the Government for doing so – reflects a sharp fall in longer-term interest rates on international money markets this week. This is due to a slowdown in expectations for economic growth and very low inflation.

The minus 0.47 per cent rate is not the lowest on record, with a number of slightly lower rates recorded on treasury bills raised in 2017 and early 2018.

The record low for this type of funding is minus 0.53 per cent, achieved in a treasury bill auction in March, 2018.

Oversubscribed

The NTMA said that for the latest loans it had received bids amounting to €1.834 billion – 3.67 times the target amount.

The low interest rates have offered significant advantages for the State in raising borrowings to refinance maturing loans. Last week the NTMA raised €1 billion in 10-year borrowings at a rate of just under 0.3 per cent. Raising new cash at lower interest rates slowly reduces the average interest rates paid on all borrowings and delivers significant benefits to the exchequer.