NTMA pays €55m for holding cash pile

The National Treasury Management Agency is paying €2.2 million each month for every €1 billion it holds on deposit to fund the State.

This is the difference it has to pay in the cost of its funds over the amount it receives from putting the money on deposit.

With the NTMA currently holding €25 billion in reserve for the State, this means that the agency is currently paying about €55 million a month in costs for holding this cash pile.

Stockpiling cash
The NTMA has been stockpiling cash over the past year or so to fund the State after it exits the EU-IMF bailout programme at the end of December and to meet bond redemptions of about €6.8 billion in January.

These cash balances fluctuate from month to month depending on the needs of the State, and are expected to decline to about €21 billion by the end of this year.

The NTMA announced yesterday that it was suspending its regular auctions of treasury bills, monthly €500 million issuances with three-month maturities, for the remainder of this year.

The NTMA said this was in “view of its relatively strong funding position”. It has also decided to “defer consideration of any further medium/long term bond issuance until early 2014”.

Funded until 2015
This is believed to be fuelled by the costs associated with holding this money on deposit and the fact that the State is now funded out to early 2015.

The NTMA’s last T-bills auction was on September 19th, when it sold €500 million with an annualised yield of 0.18 per cent. This matures on December 23rd.

Total bids received in that auction amounted to €1.671 billion, indicating the current strong interest in Irish Government bonds.

In March, it issued its first 10-year bond for more than three years, when it sold €5 billion worth of paper at a rate of 4.15 per cent.