NTMA on track to defy Lex prediction

CURRENT ACCOUNT: The FT's Lex column commented this week that the days of Government bond auctions may be coming to an end, and that debt managers might be better served by launching one large syndicated bond issue rather than getting involved in a series of smaller auctions.

The Lex theory is that with syndication, EU countries can broaden the range of buyers for their bonds to include non-traditional investment sources such as American pension funds or Asian central banks. More important, through syndication they will also find it easier to get the minimum €5 billion liquidity needed to get the bonds listed on the Euro MTS trading platform.

Now the Lex theory might suggest that the NTMA is going the wrong way in having a series of monthly auctions in the new five- and 10-year benchmark bonds. But last month's switch from the previous benchmarks has left the NTMA well on the way to getting benchmark status for the five and tens - with already €3.1 billion in the 2007 and €4.9 billion in the 2013 after the switch.

That means the new 10-year bond is already within a sniff of the €5 billion needed for entry to Euro MTS, while three auctions of the size of this week's €600 million will bring the 2007 bond up to the Euro MTS required size.

With those modest requirements does the NTMA need to go to the expense of hiring some fee-hungry investment bank to syndicate a bond issue. One thinks not!