NTMA sells bonds worth €4bn at low 0.867% yield

Another year, another successful bond sale by the National Treasury Management Agency, which manages the State's national debt.

The State body raised €4 billion from investors yesterday via a seven-year bond at a record low yield of 0.867 per cent. It was transacted through a syndicated sale of a new benchmark treasury bond maturing in March 2022.

Ireland’s three-year EU- IMF financial bailout programme, which ended in December 2013, is now but a distant memory.

Orders for up to €5.75 billion worth of bonds were received by the NTMA from more than 160 investors. Demand was less than previous sales but was seen as healthy against a backdrop of fears over deflation in the euro zone and political uncertainty in Greece.

Mark Byrne of RBS Syndicate, which acted as the lead bookrunner on the transaction, said that while demand from investors was "slightly smaller than a year ago", the "quality" of investors was arguably higher.

Mr Byrne said there was strong demand from insurance companies and pension funds in core European countries, including Austria, Germany, and Nordic states.

“Another notable” was that there was some take-up by Asian central banks, who “go after the highest quality assets”.

Overseas investors

The overseas investors were from mainland Europe (33 per cent), the UK (29 per cent), Nordics (10 per cent), Asia and the US (6 per cent each ) and others (2 per cent). Some 15 per cent of the bonds were bought by domestic investors.

In terms of investor categories, 42 per cent of the issue was sold to fund managers, 34 per cent to banks including central banks, 13 per cent to the pension fund and insurance sector, with the remaining 11 per cent spread across private banks, hedge funds and others.

“This syndicated sale . . . represents a strong start to our 2015 funding plan, which targets total bond issuance of €12 billion to €15 billion,” said NTMA director of funding and debt management Frank O’Connor.

Minister for Finance Michael Noonan said the sale showed that investor interest in Ireland had broadened to previously closed markets.

“The success of today’s syndicated bond sale by the NTMA has surpassed all expectations with €4 billion raised and the yield dropping well below 1 per cent for a seven-year bond for the first time.

“Good start”

“This represents a very good start to 2015 by the NTMA and the low rates bode very well for future issuances throughout the year. The funds that will be raised will be used to meet our regular funding requirements but also to complete the refinancing of IMF loans.”

In 2014, the NTMA refinanced €9 billion of the €22.5 billion in IMF loans given to Ireland. It plans to refinance the same amount in 2015, replacing it with cheaper funding.

“It is worth noting that today’s transaction also saw previously closed markets reopening to Ireland, with increased participation by Asian investors,” the Minister added.

"The stability of the Irish public finances and the growth prospects for the economy, coupled with the removal of the financial risks associated with the liquidation of Irish Bank Resolution Corporation and the National Asset Management Agency, has returned Ireland to investment grade with all the main rating agencies.

“Markets,” he added, “are reopening and cheaper funding is being secured.”