The Government is set to issue Ireland’s first 15-year bond since 2009 as it proceeds with plans to pay off €6.1 billion in IMF debt by the end of the year.
The National Treasury Management Agency (NTMA), which mandated six institutions to manage the transaction, is seeking to raise some €3 billion in the debt issue.
The joint lead managers for the benchmark sale are Citi, Danske Bank, Davy, Morgan Stanley, Nomura and Royal Bank of Scotland. The deal is likely to close by the end of this week, possibly as early as today.
“The syndicated transaction is expected to be launched and priced in the near future, subject to market conditions,” said a statement from the NTMA.
The ongoing bond sale comes as the Department of Finance prepares to release Exchequer returns for October this afternoon. Tax returns are running well ahead of target and a survey released yesterday suggested Irish manufacturing activity grew in October for the 17th successive month.
With bond sale proceeds likely to be used to retire some of Ireland’s IMF loans, the Government is expected to draw a further €3 billion from its €28 billion cash pile to bring the total repayment to some €6.1 billion of debt outstanding from the Washington-based lender of last resort.
Positive sentiment
Thanks to low borrowing costs on the open market, the Government’s objective is to clear relatively expensive IMF debt with cheaper debt raised from private investors.
The Government expects to eventually realise savings of some €2.1 billion with the early repayment of IMF debt, which carries an average annual effective interest rate of 3.47 per cent.
The decision to opt for a 15-year debt issue this week reflects positive investor sentiment towards Irish debt at a time when the yield on Irish 10-year debt remains well below 2 per cent.
The yield on the €7 billion 15-year bond issued by the NTMA in October 2009 was 5.472 per cent and the yield on 10.3-year bond issued in June that year was 5.93 per cent.
After a wobble on global markets last month, the restoration of relative calm in recent weeks has cleared the way for the NTMA to proceed with the bond issue.
