The Government may depart from its recent tradition of being among the first euro-zone states to sell bonds at the start of the year given its low funding target in 2025, according to a primary dealer in Irish debt.
It comes at a time when other euro-zone countries are expected to flood the debt market this year with a record level of net new supply of bonds.
The National Treasury Management Agency (NTMA), which manages the State’s funding requirements, is likely to issue toward the “lower end” of its 2025 bond-sales target of between €6 billion and €10 billion, said Roderick McAuliffe, a bond trader with Cantor Fitzgerald Ireland.
“We expect the NTMA to break with tradition and wait until later in January before bringing a new issue to market. There will be plenty of other sovereigns jockeying for position in the early days of the month while the NTMA have the luxury of biding their time, thanks to the strong funding position we find ourselves in,” said Mr McAuliffe.
The NTMA has consistently been among the first national debt offices to launch multibillion-euro bond sales in early January, through syndicates of banks and securities firms, since the Republic was at the end of its three-year international bailout, that ended in 2013.
What’s in store for 2025?
However, the Department of Finance estimates the general government surplus this year will reach a record €23.7 billion in 2024, followed by a €9.7 billion surplus next year. About €14 billion of existing government debt, including bonds and bailout-era loans from the EU, are due for redemption in each of the next two years.
The agency, led by chief executive Frank O’Connor, sold just €6 billion of bonds in 2024, at the bottom end of its targeted range, and slightly below the figure of about €7 billion raised in each of the two previous years. Recent issuance has been well below the average of more than €18 billion a year between 2017 and 2021, skewed by large deals during the Covid-19 crisis as the government funded support for households and businesses.
Reuters recently reported that bond investors will have to soak up more than €660 billion of new bond supply from euro zone governments in 2025.
There will be conflicting forces at play in 2025, affecting bond market interest rates — or yields.
The European Central Bank (ECB) is expected to continue cutting official interest rates in 2025. However, the ECB will no longer be a buyer of bonds in the market — as it stops reinvesting the proceeds from maturing bonds from a pandemic-era bond-buying programme.
Meanwhile, investors will also have to consider heightened political and economic uncertainty. In Europe, attention is on the new French government, which will need to work on passing a 2025 budget, and the upcoming February election in Germany.
US president-elect Donald Trump’s threat to impose tariffs on the EU would dent the euro-zone economy, according to economists. However, it could also ultimately result in the ECB accelerating rate cuts.
The yield on Ireland’s benchmark 10-year bonds is 2.67 per cent, down from the 2024 peak of 3.17 per cent — but up from their recent low 2.36 per cent in early December.
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