NTMA to increase amount of new borrowing

The National Treasury Management Agency is to increase the amount of new borrowing from the markets next year, aiming to sell between €9 billion and €13 billion of long-term Government bonds. The agency raised €8.25 billion this year and announced its 2017 target on Tuesday.

The amount targeted for 2017 is slightly higher than market expectations. As well as funding the State budget deficit, the NTMA has to meet bond redemptions next year of some €6.2 billion. It is also likely to purchase more of the special bonds held by the Central Bank following the liquidation of the IBRC, which the bank is under pressure from the ECB to sell down.

Funding

The NTMA announcement said that it planned "at least one syndicated bond deal during the year". These deals are used to issue new bonds, and brokers in Dublin expect that a new 10-year bond will be launched in early January to raise new funding. Ryan McGrath, head of fixed income strategy at Cantor Fitzgerald, said that the NTMA had left the way open for a possible second syndicated issue later in the year, which could involve a longer-term 20-year bond.

The NTMA will announce further details of its plans to raise long-term funding at the start of each quarter, it said.

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Market

The market for Irish Government bonds, along with other euro zone bond markets, has been supported by ECB buying in recent months. The ECB has announced that it will reduce its monthly total of bond buying from next March from €80 billion to €60 billion.

It has been buying some €1 billion of Irish bonds monthly as part of this programme, but this now looks set to fall significantly from next April. Ireland may be hit more than other markets as the ECB is already approaching its own self-imposed limits for the amount of Irish bonds it can hold.

Issuing bonds – by increase the amount of Irish debt in circulation – will allow the ECB to buy some more Irish bonds, as it increases the total which is in issue. Redeeming the special bonds issued when the IBRC liquidated also allows the ECB to buy more new Irish debt on the market. Brokers believe that total buying of Irish bonds by the ECB system – mainly the Central Bank of Ireland – may be around €500 million a month after next March.