NTMA to hold one more bond auction this year amid rising surplus

The National Treasury Management Agency (NTMA) will hold only one more bond auction in 2023, suggesting that it will finish off at the lower end of its fundraising target range as the Government’s projected budget surplus has improved since late last year.

The agency has raised €6 billion in long-term debt so far this year, out of range of between €7 billion and €11 billion that it announced last December. The NTMA, led by chief executive Frank O’Connor, said on Monday that it plans to hold its last bond auction of 2023 on September 14th. It typically raises between €1 billion and €1.5 billion in such auctions.

The announcement comes amid a strong outlook for the Government’s financial position ahead of the publication this week of its Summer Economic Statement, which outlines the intended size of the tax and spending package for Budget 2024.

The Government forecast in April that its general surplus will amount to €10 billion this year, driven by windfall corporate tax receipts, up from a figure of €6 billion that was projected when Budget 2023 was unveiled last September. That followed a much better-than-expected €8 billion return for last year.

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The surplus is expected to expand to a corporate-tax-driven €16 billion next year, according to the projections made in April.

The general government debt level is forecast to end the year at €223.5 billion, according to Department of Finance estimates, which is the equivalent of less than 79 per cent of the size of modified gross national income, which strips out the activities of multinational operating in the State.

The market interest rate, or yield, on Ireland’s benchmark 10-year bonds – a key gauge of borrowing costs – is currently 2.79 per cent, up from 0.2 per cent at the end of 2021, before investors started to bet on the pace at which central banks would be forced to raise official rates to tackle inflation.

The NTMA decided last September not to carry out any further bond sales for the remainder of 2022 after raising €7 billion out of an originally-targeted €10 billion to €14 billion as the Government was on track at the time to record a full-year budget surplus and international borrowing costs were on the rise.

Frank Hassett, head of debt capital markets at stockbroker Goodbody, said that the upcoming bond auction in September should see the NTMA reach the “lower bounds” of its €7 billion to €11 billion funding target for 2023. “Better exchequer returns are once again the reason for the NTMA’s decision to step out of the market over the coming months. At the end of May it already had cash balances of over €15 billion. We expect the NTMA to maintain its presence in the market over the coming years though, despite large surpluses expected.”