The NTMA has raised funds for the exchequer at a record low interest rate. It raised €500 million this morning at an interest rate of minus 0.22 per cent. The six-month treasury bills were sold by auction.
The interest rate is the lowest rate at which the NTMA has raised fresh funds. It has previously auctioned treasury bills at negative interest rates in March (minus 0.01 per cent) and May 2015 (minus 0.03 per cent ). Negative rates effectively mean that the lender is paying the Government a small amount, a reversal of the normal process where the borrower pays the lender an interest rate to reflect the use of the money.
The NTMA received bids accounting for 2.9 times the amount of bills on offer, it announced.
Short-term borrowings for many European governments are now in negative territory, reflecting a period of exceptionally low interest rates. The ECB is already charging banks to deposit funds with it, via negative interest rates.
Normally the shorter the time period of borrowing, the lower the interest rate. Ireland’s ten-year bonds are now trading between investors on the market at less than 1 per cent and, as with other EU governments, shorter term debt is now trading at zero or in negative territory.
