NTMA raises €6bn from bond auction to help State meet Covid-19 costs

The National Treasury Management Agency (NTMA) raised €6 billion in its largest bond sale in over a decade on Tuesday. The funds will help finance the State's response to the coronavirus crisis, which is expected to result in a budget deficit of nearly €20 billion this year.

The debt-management agency said the sale of new seven-year bonds attracted €33 billion worth of bids, meaning it was 5.5 times oversubscribed, with “strong demand” from a broad and diversified investor base.

The issue was priced at 32 basis points above the mid range of comparable euro-zone bonds, which the NTMA said represented a yield of 0.242 per cent.

Before the transaction, market sources had signalled the agency was planning to raise €3 billion to €4 billion. The agency, however, appears to have seized upon favourable market conditions to raise more. The €6 billion figure makes it the NTMA’s largest debt auction since 2009 when the State was embroiled in the financial crisis.

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"This demand highlights the progress Ireland has made in recent years to improve its sovereign credit rating and its debt sustainability," the NTMA's chief executive Conor O'Kelly said. "While the economic challenges arising from Covid-19 are significant, Ireland is well positioned to meet any additional borrowing requirements."

The funds will bolster the Government’s firepower as it ramps up supports for coronavirus-hit industries and workers.

The latest issue means the NTMA has raised €11 billion so far this year. The agency’s initial objective of raising between €10 billion and €14 billion has, however, been jettisoned as a result of coronavirus and the resulting costs to the State.

The NTMA said on Monday it had hired BNP Paribas, BofA Securities, Cantor Fitzgerald Ireland, Danske Bank, Goldman Sachs International Bank and JP Morgan to oversee the sale of the bonds, which will mature in 2027.

The Republic’s debt-management agency typically only uses a club of banks for large transactions or when issuing new debt.

Mr O’Kelly said last week that it was well positioned to increase borrowing activity in the coming years due to the economic disruption caused by the coronavirus pandemic.

It plans to hold one syndicated bond issue in April and bond auctions in May and June. It will also hold three smaller treasury-bill auctions over the next three months.

At the end of February the NTMA had €26 billion to fund this year’s €19 billion of bonds that fall due for redemption.

The final cost of Government efforts to deal with the crisis and the potential fall-off in tax receipts are not known at this stage. However, last week the Central Bank warned that an expected €2.2 billion surplus this year was likely to morph into a €19.6 billion deficit, which equates to a €22 billion swing into the red.