NTMA slow out of the blocks this year in raising debt

It had become something of a hardy annual story over the guts of the past decade to see the Government among the first out of the blocks in the debt markets every year with a multibillion-euro bond sale.

There may have been good reason immediately after the National Treasury Management Agency (NTMA) returned to bond markets in mid-2012 – when the State was in the middle of an international bailout programme – to get ahead of the traffic in early January to cover a sizeable chunk of its funding requirements for the year.

The rationale behind being an early mover, however, has waned in recent years. But while the NTMA was happy to see Italy make the first move this year across euro zone governments, raising €7 billion last week, and for Spain to line up to come to market with a major bond deal today, outgoing NTMA chief executive Conor O’Kelly probably won’t wait too much longer.

Post-bailout habit

The chatter in the market is that both Belgium and Ireland will launch large bond deals – or so-called syndicated debt sales through a club of investment banks and securities firms – by the end of the week.

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The departure from the post-bailout habit of hitting the markets early comes at a time when debt investors are still digesting the European Central Bank decision on December 16th to wind down its €1.85 trillion pandemic bond-buying stimulus programme by the end of March, amid a spike in inflation.

The market interest rate – or yield – on Ireland’s benchmark 10-year bonds have risen from 0.05 per cent to more than 0.36 since then. We raised money a year ago at a negative yield.

Even though ECB chief economist Philip Lane stuck to the official line in an interview last week that soaring inflation – running at 5 per cent last month – is transitory and unlikely to lead to interest rate hikes this year, investors are increasingly expecting a move at some stage in 2022. They have been emboldened by comments from a fellow ECB executive board member, Isabel Schnabel, over the weekend that the green energy transition poses inflationary risks over the medium term.

The uncertainty alone should be reason enough for O’Kelly to get as much of the NTMA’s planned €1-€14 billion funding done before he departs by the middle of the year.