For the first time in 15 months, Ireland is to issue debt to meet its refinancing requirements. Now that medium/long term rates have come close to their lows, the National Treasury Management Agency (NTMA) will issue two benchmark government bonds to refinance part of its E36.5 billion national debt.
In the second half of January 2002, the NTMA will begin its programme of refinancing all maturing long term debt of some E5 billion, plus a portion of the short term debt, when it offers the holders of the current 3.5 per cent Treasury Bond 2005 and the four per cent 2010 terms for switching their holdings into new 2007 and 2013 benchmark bonds.
In addition to being listed on the Irish Stock Exchange, the new bonds will also be listed on the EMTS electronic trading system, which is used by almost all of the other Euro member states, in order to enhance turnover, transparency and liquidity.
From February to November 2002, the NTMA will hold a series of monthly auctions. Each auction is expected to be in the E500 million E700 million range.
Although Ireland has the second lowest debt/GDP ratio of the 15 EU member states, falling from 39 per cent to 36 per cent at the end of 2001, now is seen to be an opportune time to re-enter the debt markets.
Irish government bonds have continued to trade at a tight spread compared to German government bonds. At year end the spread on the 2010 was 14 basis points over the comparable German yield versus 24 basis points at end 2000. Foreign interest has continued to grow and an estimated 60 per cent of these bonds are now held by non-residents as compared with 47 per cent at end 2000.
In October 2001 Standard & Poor’s upgraded Ireland to the top AAA credit rating, to add to the AAA ratings it holds from Moody’s and Fitch.
Further indication of the underlying strength of the Irish Government bonds market, is that turnover on the Irish Stock Exchange in 2001 was E43.4 billion, which is only marginally lower than the 2000 figure of E44.9 billion. This is despite the fact that no new bonds were issued in 2001.
According to the NTMA, further sales of treasury bonds during 2002 is a possibility. |
