State to auction €1bn in 10-year bonds

Bonds expected to carry negative interest rate

More than €6.6 billion of these 10-year bonds have already been issued and they carry a coupon  of 1.1 per cent. Photograph: iStock

More than €6.6 billion of these 10-year bonds have already been issued and they carry a coupon of 1.1 per cent. Photograph: iStock

 

The State will auction €1 billion in 10-year bonds which are expected to carry a negative yield for investors.

The National Treasury Management Agency (NTMA) said on Monday it planned to raise the money this coming Thursday.

Given the existing yield on the 10-year bonds of -0.018 per cent, it is expected that the bonds auctioned on Thursday will also carry a negative rate.

More than €6.6 billion of these 10-year bonds have already been issued and they carry a coupon – the annual interest payment a bondholder receives – of 1.1 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 and the NTMA has been taking advantage of the low interest rate environment for some time.

However, a no-deal Brexit could threaten the State’s ability to raise cheap money, with economic growth set to drop significantly.