EFFORTS by the National Treasury Management Agency to auction off £150 million worth of five year variable rate gilts have failed and the agency has been left with over half of the stock on offer.

This is the first time that an auction by the NTMA has failed to find sufficient buyers and the failure is being blamed on nervousness among investors about credit figures due to be released by the Central Bank tomorrow.

NTMA director, Mr John Corrigan, confirmed that the agency accepted £67 million worth of bids and rejected a further £20 million on the basis that the price was too low. The agency bought the remaining £83 million for funds under its own control. It is likely that at some future date the agency may again offer this paper to the market when the appetite for variable rate stock improves.

Mr Corrigan said the auction was intended to provide an opportunity for investors to reinvest some of the funds they received when £850 million of a 1996 gilt was repaid yesterday.

He said the NTMA had done a lot of pre funding to meet this redemption and commented: "We have plenty of loot in the bank" to meet the redemption.

We were not terribly fussed about the auction. We had a big redemption, so we decided to give people the opportunity to reinvest, we sold £200 million of five year fixed rate stock last week, so we decided to offer variable rate stock on this occasion."

The interest paid on variable rate gilts is linked to three month interbank rates and is adjusted every three months. Part of the nervousness on the Irish market about investing in the variable rate stock was in anticipation of some key US economic figures released yesterday afternoon.

As it transpired, the growth in US wage costs in the second quarter of the year was lower than analysts had expected and provided some reassurance to investors worried over the prospects of a rise in US inflation. However, the better than expected US figures were announced after the gilt auction closed.

Bond prices improved after the release of the US figures and this improvement filtered through to the Irish market. The bid price for the variable rate stock at the close was the same as the price paid by the NTMA to buy in the stock not taken up in the auction.

Riada economist, Mr Padhraic Garvey, said investors were reluctant to take positions ahead of the credit growth figures, to be announced by the Central Bank tomorrow. "I think people would prefer to see the data and know where they stand before they take positions," he said.

Where the money from the gilt redemption actually went was a matter for discussion on the market yesterday. But one thing seems clear - it did not go back into the market in either fixed rate or variable rate gilts.

One dealers said it seemed likely that, institutions found a home in the money market, although rates on this cash market did not alter appreciably. One month money was unchanged yesterday on 5.51 per cent.