NTMA achieves €24bn debt-raising target with further bond auction

The National Treasury Management Agency (NTMA) sold a further €1.25 billion of debt on Thursday, bringing its long-term borrowing for the year to €24 billion.

The agency’s latest bond auction was the sixth and last of the year.

The NTMA auctioned two tranches of 10- and 30-year bonds at yields of minus 0.2 per cent and plus 0.4 per cent.

Minus yields mean creditors are paying the Government for the privilege of lending to it, a reflection of the current low-rate environment.

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A total of €8 billion has been issued by the NTMA in these auctions in 2020 and a further €16 billion raised in three syndicated transactions, where the NTMA uses a network of banks, typically for bigger sales. The latest auction brings the NTMA’s long-term borrowing for the year to €24 billion, the upper limit of its revised €20- €24 billion target.

The agency’s initial objective of raising between €10 billion and €14 billion was jettisoned back in April as a result of coronavirus and the projected cost to the State of dealing with the crisis.

The €24 billion will help finance additional spending on wage supports and health related to the pandemic, which is expected to result in a budget deficit of over €20 billion this year.

Euro zone bond yields fell this week as caution replaced enthusiasm over Covid-19 vaccines, while focus also remained on the European Central Bank.

ECB president Christine Lagarde said on Wednesday the bank would focus on more emergency bond purchases and cheap loans in its new stimulus package, due in December.

Yields pulled back after bond prices fell earlier in the week on news of the Pfizer vaccine. On Thursday, Germany’s 10-year yield was down 1 basis point to minus 0.52 per cent in early trade.

UniCredit analysts noted that while European equities have gained and broken out of their recent trading range on the vaccine news, the Bund yield remains within its recent trading range and near its average since April. “This suggests that ... investors are pondering with caution the implications of the vaccine on the economy,” they said in a note, adding that concern over lockdowns may outweigh optimism around a future vaccine.

Last month the NTMA sold a tranche of seven-year bonds at a record low yield of minus 0.4 per cent.

The ultra low yields on Irish debt caps a remarkable turnaround for the NTMA and Irish bond markets, which saw yields soar above 14 per cent during the height of the sovereign debt crisis less than a decade ago.

The NTMA said it would hold a smaller treasury bill auction next week. – Additional reporting: Reuters