Business

NTMA seeks to raise €3bn in bond sale amid European fundraising flurry

Debt office continues its tradition of running early January sale

NTMA chief executive Frank O’Connor. Photograph: Dara Mac Dónaill

Joe Brennan
Wed Jan 10 2024 - 12:53

The National Treasury Management Agency (NTMA) has hired a group of financial houses to sell €3 billion of bonds that will mature in 10 years, as it seeks to tap heightened investor demand for government debt before expected central bank rate cuts this year.

The State’s debt-management agency, led by chief executive Frank O’Connor, is typically among the first euro-zone government debt issuers ever year.

While it also usually raised more than original target in the first bond deal of the year, this year it has set a cap at €3 billion. This most likely reflects the fact that it plans to raise only between €6 billion and €10 billion on the bond market in 2024 and would like to spread out bond sales to take advantage later in the year of potentially lower borrowing rates, according to observers.

The NTMA has hired Barclays, BNP Paribas, Cantor Fitzgerald Ireland, Citigroup, Danske Bank and JP Morgan as joint lead managers of the bond sale. The deal is expected to price on Thursday, according to market sources.

READ MORE

Sales of bonds in the European primary market from governments, agencies and companies look set to reach record levels this week, with expectations for central banks to ease monetary policy this year, according to Bloomberg. Money markets are betting on more than five quarter-point interest-rate cuts by the European Central Bank, starting in April.

Spain, Belgium, Italy and Estonia are among euro-zone countries that have launched large bond deals this week. Spain received more than than €137 billion of bids on Wednesday for €15 billion it had on offer.

ING estimates that the euro area will issue about €150 billion of debt this month alone as governments seek to take advantage of the recent yield fall and investors look for new-year opportunities.

The ECB hiked its main lending rate from zero to 4.5 per cent in the 14 months to last September.

The market interest rate, or yield, on Ireland’s current benchmark 10-year bonds pulled back from a high of 3.357 per cent in October to 2.19 per cent at the end of last year. However, it has subsequently edged up to 2.5 per cent as bond market investors have reined in expectations since the start of the new year on how quickly the ECB will move to cut official rates this year.

ECB executive board member Isabel Schnabel said on Wednesday that talk of cutting official rates was premature at this stage, saying the bank would keep key policy rates “at restrictive levels until we are confident that inflation sustainably returns to our 2 per cent target”. Euro-zone inflation was running at 2.9 per cent in December. While it was down from a peak of 10.6 per cent in late 2022, it was up from a reading of 2.4 per cent in November.

The €6 billion to €10 billion the NTMA is seeking to raise in 2024 is in line with debt sales over the past two years and is sharply down from an average of about €16.5 billion of bonds a year between 2014 and 2021, including large issuances during the Covid-19 pandemic.

The relatively low target for this year reflects the facts that the NTMA is sitting on healthy cash balances of almost €25 billion, the Department of Finance forecasts the general government surplus will amount to €8.4 billion this year, down marginally from €8.8 billion in 2023, and the agency has to deal with about €9 billion of existing debt that will fall due this year.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

LATEST STORIES