The State’s debt-management office sold €1.25 billion of bonds on Wednesday, meaning it has completed more than 85 per cent of its minimum full-year target, as debt investors keep a cautious eye on the forthcoming French presidential election.
The National Treasury Management Agency (NTMA) sold €700 million of debt that matures in 2026, priced to carry a market interest rate – or yield – of 0.936 per cent, and €500 million of 2023 bonds which were priced to yield 0.2 per cent.
Investor demand for the 2026 bonds amounted to 1.6 times the value of bonds on offer, compared with a ratio of 1.7 for the last auction of similar securities in March.
The debt sale occurred against the backdrop of a flurry of debt auctions by euro-area countries, with traders saying investors are being cautious against the backdrop of rising political and diplomatic tensions globally. Germany, Portugal and Italy were also in the market selling bonds on Wednesday.
Ireland's notional long-term borrowing costs in the market fell, with the market interest rate, or yield, on its 10-year bonds falling by 0.03 percentage points to 0.915 per cent. However, other peripheral markets, including Spain, Portugal and Italy, saw their 10-year bond yields increase.
Presidency
France
is the main focus for European investors, with far-left candidate Jean-Luc Mélenchon rising in polls to join far-right and anti-European Union candidate
Marine Le Pen
among the contenders for the presidency ahead of first-round voting on April 23rd.
The NTMA has now issued €7.75 billion of bonds so far this year out of a full-year targeted range of between €9 billion and €13 billion.
"The NTMA remains well ahead of schedule regarding funding for 2017," said Ryan McGrath, head of fixed-income strategy at Cantor Fitzgerald in Dublin.
"The Irish macroeconomic backdrop continues to be very favourable," he said, noting that the Department of Finance upgraded its economic forecasts this week and is now targeting 4.3 per cent gross domestic growth this year followed by 3.7 per cent expansion in 2018.
Balanced budget
While the Government is on track to have a balanced budget in 2018 for the first time since the beginning of the financial crisis, the NTMA will remain very active in the bond markets over the coming years as it seeks to refinance debt as it falls due.
Some €48.6 billion – or 38 per cent – of Irish government bonds are due to mature within the next five years, according to data published by the Central Bank on Wednesday. Of this €29.2 billion must be repaid within three years.
