The new bond exchange programme has been delayed once again as the National Treasury Management Agency (NTMA) continues negotiations with fund managers about the programme's detail.
The bond exchange programme - under which the NTMA will buy back £133 million (€169 million) of bonds and exchange them for bonds with lower rates of interest - will be designed to bring Irish bonds into line with those in other European countries. It is hoped that this will boost liquidity in the market, making Irish bonds more easily comparable with those elsewhere in the euro zone and ensuring a continuing market in Government debt.
The markets had expected the agency to give one week's notice last Monday, but that has now been delayed. No firm proposal has yet been drawn up and no timetable published. Notice is expected before the end of next week.
It is understood that differences between the Irish Association of Investment Managers (IAIM) and the NTMA are responsible for the latest delay. Fund managers hope the exchanges for the various bonds will be run out as quickly as possible, preferably with the key issues available at the same time. A long gap between them could leave them vulnerable should any "shock" occur, which would move interest rates in the intervening period.
Investors will be asked to switch from bonds that would have matured in 2008 to ones maturing in 2010. Over a bond's lifetime, payments would be broadly neutral, but over the duration of the changeover programme, there could be significant changes.
The NTMA, however, would prefer to have each key issue - for example, the 10-year bond - bedded down before proceeding with the next one.
So far, it is unclear how this difficulty will be resolved, but it seems likely that a compromise will be reached and that the programme will be completed by the summer.
NTMA director Mr John Corrigan said the agency would give one week's notice "fairly shortly".
Ms Anne FitzGerald, IAIM chief executive, said it wanted to make sure the work was done properly. "We are not pushing a timetable and are willing to accept delays," she added.
Mr Oliver Mangan, economist at AIB, a market maker in the bonds, said the priority was to ensure the programme's success. "We need to see a large uptake, so that we end up with large liquid issues which can be easily traded."
He added that the NTMA needed to make the debt as attractive as possible to buy.
He expects the key 10-year bonds to be priced at about 4.15 per cent, just slightly above the level paid by the Finnish and Dutch governments in an effort to attract investors.
The programme has already been delayed because of the length of time needed to arrange the configuration of the bonds to match the detail of bonds in Germany.
There have also been issues relating to the settlement of the bonds - which have now been agreed with Eurostat - as well as taxation changes introduced in the last Finance Bill.
The NTMA met market makers last Friday and the investment managers on Monday. Further meetings are planned for later this week.
Mr Corrigan also stressed that the agency was talking to all categories of investor.
"We are trying to make sure the process will suit as many of the holders as we can, as we are targeting a high take-up," he said.
