Cantillon: Purveyors of Irish debt have to wait

Mario Draghi’s signal of a new stimulus package from the European Central Bank sent sovereign bond yields lower and stock markets higher. Equities received a further fillip when China cut interest rates for the fourth time this year. The well-crafted intervention by Draghi (right) was enough to send yields on Italian and Spanish two-year government bonds below zero for the first time, meaning investors are paying to lend to the two countries.

With Irish yields in very low territory, clear signs that the ECB is gearing up to expand its quantitative easing programme could well be taken as an invitation to go to the market with more debt issues at attractive rates. The logic is clear.

Still, the National Treasury Management Agency signalled earlier this month that there will be no further bond sales this year. Talk of a November general election was the presumed catalyst for that declaration. After all, no one wants to be exposed in money markets in the middle of an election.

The NTMA’s caution was astute, although the election won’t now take place until spring. This means the purveyors of Irish debt will have to wait out the favourable conditions which prevail now. That said, the likelihood of a decision from the ECB in December suggests positive conditions for debt issuance will continue.

However there is also the election to contend with, an event that could yet be put back until April. All signs point to to a poll in early February; however, with the campaign proper beginning in mid-January. In the early new year at least, this would further narrow the window for debt issuance.