NTMA to push ahead with €750m bond auction

Despite recent upheavals in bond markets, the National Treasury Management Agency is pushing ahead with a planned fundraising on Thursday, auctioning €750 million of a seven-year bond. Bond interest rates have risen in the last couple of weeks and while the market has improved slightly in the last couple of sessions,investors seem unclear where the market is going next.

European bond yields reached historic lows in recent weeks, with the benchmark German 10-year yields falling to just over 0 per cent and yields in Ireland and other market also dropping.

However the benchmark 10-year German bond is now yielding around 0.6 per cent – after having touched 0.8 per cent at one stage – after a reversal which took most forecasters by surprise.

The 0.8 per cent 2022 bond being auctioned on Thursday traded under 0.3 per cent at the peak of the market and is now yielding around 0.7 per cent. While bond rates have risen, they remain very low by historical standards and so the NTMA is pushing ahead with the auction having indicated to the market at the start of the quarter that it would sell some bonds this week.

The auciton will be closely watched, particularly if uncertainty about Greece’s situation builds.

The NTMA has already raised €9.5 billion this year out of a total targeted fund-raising of €12 billion to €15 billion. Most of the money raised to date has been for longer maturities – including €4.5 billion raised in a new 30-year bond.

Bond prices were hit hard last week, with a mixture of factor blamed, including changed expectations for growth and inflation, the UK election and the ongoing uncertainty about Greece.

Nonetheless the sudden sell off surprised analysts and many investors, particularly given the commitment by the European Central Bank to support the market by buying significant amounts each month from other investors. EU finance ministers negotiations on Greece are the main factor likely to influence markets over the next couple of days, with some nervousness in Italian and Spanish bonds today seeing yields rising and Irish ten year rate ending slightly higher to 1.25 per cent.