State hits 40% of minimum 2020 funding target with bond sale

NTMA sells 15-year bond to carry 0.45% yield

The Republic is among the first euro zone governments to target the bond markets this year. Photograph: iStock

The Republic is among the first euro zone governments to target the bond markets this year. Photograph: iStock

 

The State has raised 40 per cent of its minimum 2020 funding target only a few days into the year after selling a higher-than-expected €4 billion of long-term bonds on Wednesday.

The National Treasury Management Agency (NTMA) received over €20 billion of orders from more than 200 investors for the bond, which was originally set to raise €3 billion, according to market sources.

The bonds were priced to carry a market interest rate, or yield, of 0.45 per cent, the NTMA said.

“It is encouraging that Ireland continues to benefit from the current low interest rate environment,” said Frank O’Connor, the NTMA’s director of funding and debt management.

“Today’s transaction supports the favourable trend of reductions in our annual debt-servicing costs, which we expect will fall to €4.5 billion for 2020, down from a peak of €7.5 billion in 2014.”

The Republic, Portugal and Slovenia have been the first euro zone sovereigns to hit the bond markets this year, ahead of a traditional rush of issuance by governments in January.

Davy, Deutsche Bank, JP Morgan, Morgan Stanley, NatWest Markets and Nomura are joint lead managers for the Irish deal, which is occurring against the backdrop of strong demand for safe haven investments such as bonds as markets monitor tensions in the Middle East.

The yield on Ireland’s benchmark 10-year bonds has fallen from 0.119 per cent to 0.031 per cent since trading got under way on January 2nd.

The NTMA plans to raise between €10 billion and €14 billion in the bond markets this year. That compares with the €15.4 billion it raised in 2019, which was itself at the lower end of its €14 billion to €18 billion target.

With the Government having run a small budget surplus since 2018, the NTMA’s fundraising efforts are largely to refinance bond debt as it falls due. Some €10.6 billion of bonds fall due in April. A further €6.5 billion matures in October.