NTMA halts planned bond issue

There was more good news on the economic front yesterday when the NTMA said it did not plan to issue any more bonds this year due to the strength of the public finances.

The National Treasury Management Agency (NTMA), which manages Ireland's €38 billion of national debt, said it had originally planned to issue €4 billion of debt this year.

But the success of its bond auctions in the first six months of the year, coupled with the strong position of the public finances, meant no further issuance was required in the second half of this year, it said.

The NTMA's announcement follows the release on Friday of figures showing that the Exchequer took in €1 billion more in taxes over the first six months of the year than it had expected.

At the end of June, the national debt stood at €37.7 billion while the public finances were in surplus by €130 million compared to a deficit of €344 million at the same stage in 2003. The result was driven in large part by €580 million drawn in by the Revenue Commissioners under special tax evasion investigations

Rather than being forced to borrow the €2.8 billion he thought he would need to fund spending this year, the Minister for Finance, Mr McCreevy, now expects a borrowing requirement, or deficit, of just €1.7 billion, easing the funding pressure on the NTMA.

The agency sold €3.4 billion of a new benchmark 16-year bond, due 2020, in the first half in a series of five auctions. As a result, it had planned just one more auction this year but this will not now be needed.

"The funding position will be kept under review and should there be any significant change in circumstances, a further announcement will be made," the agency said.

Private sector economists said the announcement by the NTMA had been expected following Mr McCreevy's downward revision of the borrowing forecast. "The undershoot in the Exchequer Borrowing Requirement (EBR) has been building for some months," said Mr Oliver Mangan, economist at AIB Group Treasury.

He believes the EBR could be as low as €1.3 billion this year, below the Government's estimate, leaving the NTMA well overfunded. This would give the agency the option of retiring debt early or of carrying over money into next year to meet the Exchequer's borrowing needs in 2005.

The absence of a supply of bonds over the balance of this year should be good for the Irish bond market, underpinning the levels at which Irish bonds trade.

The developments on the borrowing front are the latest in a stream of good news for the economy. Last week, the Central Statistics Office (CSO) said the economy grew faster at the start of 2004 than at any time since 2001, while other figures showed unemployment levels dropping to an 18-month low in June as redundancies also fell.