NTMA lets investors swap €1.5bn for longer-term bonds

The National Treasury Management Agency (NTMA) has quietly eased its debt repayments schedule by allowing investors swap €1.5 billion of bonds due to be repaid in the near-term for longer-maturity debt.

The debt agency’s chief executive, Conor O’Kelly, referred to the amount of bond switching it has facilitated at a Dáil Public Accounts Committee meeting yesterday. Market sources said this took place in the past 18 months, and included swapping bonds due to be repaid by 2020 for securities that mature as far out as 2045.

The low-profile deals, responding to investor requests, contrast with official offers the NTMA launched between 2012 and 2014 to buy back and switch bonds to smooth its debt repayments schedule.

With the State facing about €45 billion of debt repayments between 2018 and 2020, the agency has previously indicated it may publicly launch further bond swaps in the coming years.

Meanwhile, Mr O’Kelly said he sees little value in the State repaying further international bailout loans early as any savings would be marginal.

The NTMA completed the refinancing of €18 billion of IMF loans in March of last year with lower-cost market borrowings to save €1.5 billion in lifetime interest payments. Ireland would only achieve “marginal” savings by seeking to refinance the remaining €4 billion of IMF loans, while “we can’t borrower at any cheaper rates” than the European element of the 2010 bailout.

IMF loans

The rate on the remaining IMF loans “is about 0.5 per cent for an average life of over six years”, Mr O’Kelly said. Ireland’s benchmark 10-year bonds currently carry a market interest rate, or yield, of 0.484 per cent.

The Government would need approval from all members of the troika to repay the remaining IMF loans ahead of schedule. In addition, a condition of the refinancing of the €18 billion of IMF loans was that the fund would continue to have exposure to Ireland and remain part of the post-bailout international surveillance team.

Mr O’Kelly said that as NTMA refinances a mountain of debt due to be repaid by 2020, its annual interest burden may fall to about €6 billion from €7 billion last year if market interest rates remain stable.

Last year saw the State’s interest bill fall for the first time since 2008, from €7.5 billion in 2014, as it borrowed at cheaper rates in the market, helped by the European Central Bank’s quantitative easing bond-buying programme.

Economic factors

However, Mr O’Kelly reiterated comments made last week that Ireland’s borrowing rates, currently at ultra-low levels because of ECB intervention, would ultimately reflect the negative impact of Brexit and other economic factors “in the medium term”.

Separately, he said that the agency’s plans to help alleviate social housing shortages without affecting the State’s finances should have real impact.

The Government’s Action Plan for Housing and Homeless, launched on Tuesday, said the NTMA may set up a funding vehicle with the private sector to invest in social housing in a way that it remains off the State’s balance sheet.

The vehicle would buy properties that local authorities cannot currently afford and lease them over 20 to 25 years, Mr O’Kelly said.

It would replicate a National Asset Management Agency subsidiary, set up in 2012, that has bought hundreds of properties from its debtors and leased and sold them on for social housing purposes.

The NTMA-run Ireland Strategic Investment Fund is also working on possibly co-funding with private investors for the development of infrastructure to “unlock” large development sites.