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Investor demand for Irish debt remains high – NTMA

By July 10, 2022No Comments

The organisation which manages Ireland’s national debt has said the country’s borrowing position remains strong, despite the rising cost of servicing it.

In a mid-year update, the National Treasury Management Agency (NTMA) said that because of its multi-year programme of pre-funding and its decision to take advantage of historically low rates in recent years, it now has €30 billion in cash.

This will lower the need to borrow at higher rates in the coming years.

The debt also has a long average maturity of 10.7 years, the NTMA added, making it one of the longest in Europe.

This reduces the risk of refinancing as markets expect rates to continue to increase, it claimed.

Just 4-7% of Ireland’s debt stock requires refinancing every year over the next decade.

The agency, which is responsible for Ireland’s €240 billion debt pile, also claimed that investor demand for Irish sovereign debt remains high.

This has been assisted by three positive ratings agency upgrades between January and June.

So far this year, the NTMA has issued €5.75 billion in bonds at an average yield of 0.76% and an average maturity of 13 years.

Last year the average yield on newly issued bonds was 0.18% at an average maturity of 14.4 years. A year earlier it was 0.21% at an average maturity of 11.5 years.

“Whilst the cost of servicing Ireland’s debt will increase from 2022 onwards, Ireland’s borrowing position remains strong with a significant cushion in place to mitigate the impact of higher borrowing rates,” Frank O’Connor, the NTMA’s CEO, said.

The organisation also said that 60% of the country’s target range of €10-€14 billion funding requirements for this year had been completed before interest rates began their upward trajectory.

As a result, the expectation is that the average rate on Irish sovereign debt will remain close to 1.5% in 2022, with the interest bill similar to last year.

The NTMA boss made the comments as the agency also published its annual report for 2021.

It shows that during 2021, the Ireland Strategic Investment Fund (ISIF) made a return of 10.7%, with investment gains of €900m.

ISIF made 25 investments totalling €670m last year, bringing its total commitments to €5.6 billion across 166 investments and €9.4 billion of co-investment commitments since inception.

A further €477m in investments have been made so far this year.

“ISIF’s updated investment strategy, announced last month, sets out ambitious targets for investments in Ireland targeting climate action, financing the delivery of new homes, promoting our food and agriculture sector, scaling up indigenous businesses, and harnessing the economic potential of regional cities,” said Mr O’Connor.

He added that last year saw the National Development Finance Agency drive significant volumes of new homes through social housing public private partnerships.

It also completed work on two new academic buildings at the new Technological University of Dublin campus at Grangegorman.

“The State Claims Agency (SCA) resolved 4,100 claims across its general and clinical claims portfolios in 2021,” Mr O’Connor added.

“It also continued to support State authorities on the management of litigation risks – with Covid-19 related work remaining a significant element of the SCA’s risk and indemnity advisory activities through the year,” he stated.

59% of claims were resolved without court proceedings being served.

The remit of NewERA, which also falls under the NTMA, was further extended in 2021 with 18 commercial State bodies now designated, up from 7 in 2020. Advice was provided on 163 assignments, up from 144 in 2020.

Minister for Finance Paschal Donohoe welcomed the contribution of the NTMA last year.

“The agency has played a decisive role in engaging with stakeholders, communicating the strength of the State’s financial position to market counterparties, and ensuring that the State’s borrowing requirements are met,” he said.

Investor demand for Irish debt remains high – NTMA – RTE

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