Republic sells 10-year bonds at highest rate in over two years

The National Treasury Management Agency (NTMA) sold 10-year bonds on Thursday at the highest market interest rate for such notes in over two years, following an increase in borrowing costs across global markets in the past month amid fears over inflation.

The 0.184 per cent rate on the 2031 bonds, while a tiny fraction of the 14 per cent yield investors were demanding to buy Irish 10-year bonds at the height of the financial crisis a decade ago, was up from the 0.02 per cent rate attached to similar notes in the most recent debt auction a month ago.

It also compares sharply with the negative rate of minus 0.26 per cent the NTMA achieved when it sold €5.5 billion of 2031 bonds in January.

The NTMA sold €450 million of 10-year bonds, €650 million of notes that mature in 2045 and a further €400 million of 2050 bonds in an auction on Thursday. It brings the total raised by the State debt management agency’s long-term fundraising so far this year to €17.5 billion, close to its full-year target of €18 billion to €20 billion.

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Government bond yields have risen globally over the last month, fuelled by worries about a spike in inflation as economies continue to ease Covid-19 restrictions and hawkish comments from central banks about potential interest rate increases to rein in rising consumer prices.

While the European Central Bank has downplayed any prospect of raising its interest rates any time soon, Bank of England policymaker Michael Saunders said earlier this week that UK households must brace for "significantly earlier" interest rate rises to combat inflation. The US Federal Reserve is expected to raise rates next year.

Still, the ECB signalled early last month that it would “moderately lower” monthly bond-buying under a massive stimulus programme unleashed at the start of the Covid-19 pandemic.

That programme has helped keep interest rates at ultra-low levels as governments across the euro zone borrowed hundreds of billions of euro to fund supports for households, businesses and health systems during the crisis.