NTMA successfully swaps €3.5 billion of bond debt

The National Treasury Management Agency (NTMA) has successfully swapped more than €3.5 billion of debt in its first return to the bond markets since September 2010.

Seen as major boost to the economy, today's auction will increase the country’s chances of exiting the EU-IMF's aid programme on schedule and avoiding a second bailout.

The NTMA swapped a note due to be repaid in 2014 for one maturing a year later in 2015 to smooth its funding requirements.

About €12 billion of Government debt was due for repayment in 2014, the year after the EU-IMF funding programme ends. This will now be reduced to a more manageable €8.5 billion as a result of today's auction.

Spreading out repayments also means Ireland needs to raise less cash next year to finance 2014.

The agency priced the new security, which has a 4.5 per cent coupon, at a 5.15 per cent yield. The yield on the 2014 bond bought back by the NTMA is 4.9 per cent.

The move marks the NTMA’s first significant engagement with the bond market for over a year.

Minister for Financer Michael Noonan earlier called the 2014 maturity a "cliff hanging over us" as the State seeks to regain its economic sovereignty after the EU-IMF bailout.

"Today's exercise is a very positive surprise for an Irish bond market that has seen no NTMA involvement since September 2010," said Donal O'Mahony of Davy stockbrokers. "It reflects the sustained improvement in market sentiment over the past two months."

The NTMA said the new offer was in response to approaches from market participants and will help address demand for Irish Government paper maturing in 2015 that is currently unmet. It will also reduce the size of the maturities which will be required to be met in January 2014.

“This exercise will help us smooth the maturity of the bond due in January 2014. The decision to undertake this now reflects substantial demand among investors for our short-dated paper and the resulting decline in yields on Irish paper recently,” said a spokesman for the agency.

"This is a very smart move by the NTMA, as it lessens the 2014 funding cliff," said Cathal O'Leary, head of fixed income at NCB Stockbrokers. "Plus if they switch at anything less than par, it's a gain for Ireland's balance sheet, while they maintain goodwill in the market."

Ireland's October 2020 bonds, regarded as the nation's benchmark, were trading at 7.38 per cent today, compared with 8.15 per cent at the start of November.