NTMA to raise up to €20bn in bond markets next year

The National Treasury Management Agency (NTMA) plans to raise between €16 billion and €20 billion in the bond markets next year to cover a budget gap caused by the Government's response to the Covid-19 crisis and potential fallout from Brexit.

The agency, which manages government funding, tapped the markets for €24 billion this year at an average interest rate of 0.02 per cent as European Central Bank’s multitrillion-euro bond-buying initiatives kept borrowing costs down across the euro zone.

The Department of Finance predicts the State's budget shortfall will be around €18 billion next year.

“Our strategy of pre-funding liabilities has allowed us to respond to the challenges of the Covid pandemic from a position of strength,” said Frank O’Connor, director of funding and debt management at the NTMA. “This strategy gave us flexibility during 2020 to match our increased borrowing requirements with investor demand.”

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With the Republic currently scheduled to repay relatively lower levels of borrowings than most other European countries over the next four years, the NTMA has “additional flexibility in meeting future borrowing requirements”, he said.

ECB purchases

The ECB is expected to have bought up more than €16 billion of Irish government debt by the end of this year under both its long-running and special Covid-19 bond-buying programmes, according to Davy economist Conall MacCoille.

That is the equivalent of three-quarters of the new debt the State issued this year to deal with the ballooning cost of the coronavirus shock to the economy and health system.

Economists predict that ECB president Christine Lagarde will on Thursday announce plans to increase the pandemic bond-buying programme from €1.35 trillion to €1.85 trillion to deliver a clear message to governments and banks not to worry about rising debt levels or borrowing costs as they deal with the crisis.

This means that the ECB could buy up to €19 billion of Irish bonds next year, according to Mr MacCoille, the equivalent of almost all of the long-term debt the NTMA plans to issue.