Government bonds total falls by €8.8bn from record high

The amount of Irish government bonds outstanding fell in March from an all-time high of €128.8 billion, with the figure seen declining further following a subsequent massive debt repayment by the debt office.

Figures published by the Central Bank yesterday show the State’s level of bonds in issue fell by €1.5 billion in March to €127.3 billion. That was before the National Treasury Management Agency (NTMA) redeemed almost €7.3 billion of bonds in April.

While the NTMA plans to sell €750 million of bonds today, some analysts predict total issuance this year will fall short of the amount of debt redeemed. This, together with the fact that the European Central Bank is buying billions of euro of the State’s bonds in the market, will make it increasingly difficult for fund managers and other private investors to buy Irish debt in the market.

Today’s bond sale will bring total NTMA issuance so far this year to €5.5 billion, or more than 90 per cent of its minimum full-year debt-raising target of between €6 billion and €10 billion.

“We estimate that the ECB will buy between €11 billion and €12 billion of Irish sovereign bonds this year,” said Owen Callan, an analyst with Cantor Fitzgerald in Dublin.

“With total bond sales this year unlikely to reach €8 billion, it’s going to be increasingly difficult to source bonds in the market. On the plus side for the Government, this should keep borrowing costs down.”

Falling yield

The market interest rate, or yield, on Ireland’s benchmark 10-year bonds has fallen to 0.85 per cent from a high so far this year of 1.18 per cent in January and well off an all-time high of more than

14 per cent in 2011.

Already this year, the daily average volume of Irish government bonds traded has fallen to about €600 million from €1 billion, according to Mr Callan.

Trading in European sovereign debt has also been by rising regulatory capital demands.