NTMA plans €1bn bond auction on Thursday as borrowing costs inch up

The sale of 7-year and 10-year notes will help fund the State’s response to Covid-19.

The interest rates attached to these bonds have increased in recent months amid fears over inflation and the possibility that central banks may increase interest rates to temper price growth.

The 0.184 per cent rate attached to 10-year bonds auctioned last month was up from the 0.02 per cent rate on similar notes previously and a negative rate of -0.26 per cent achieved when the agency sold €5.5 billion of 2031 bonds in January.

Central banks have been grappling with how to deal with high inflation readings from around the world when the global economy is still recovering from the Covid-19 crisis. ECB chief Christine Lagarde said last month that the bank's last meeting was about "inflation, inflation, inflation". Subsequently yields across the EU rose to their highest levels in months.

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The NTMA expects to raise up to €20 billion on bond markets this year. Borrowing €4 billion a year to fund the Government’s new Housing For All strategy will also be supported by international funding markets.

– Additional reporting Reuters