NTMA set to launch €3bn bond auction

THE Government is expected to raise between €3bn and €4bn from a syndicated bond deal this week as yields remain suppressed, despite mounting concerns about an escalating trade war between the US and China.

The National Treasury Management Agency (NTMA) yesterday mandated six banks to run its latest syndicated bond auction. Sources said the NTMA intends to pull the trigger on the deal today, although there is a small chance it will hold off until Wednesday. However, the benign conditions in bond markets mean the Government is on course to secure another near rock-bottom yield from investors as valuations for sovereign debt remain elevated.

One source predicted the 15-year notes will attract a rate of close to 1.25pc. Yields on ten-year Government debt are hovering at around .92pc.

While the NTMA is targeting €3bn, it may expand the book to €4bn if it encounters strong demand. That would take the State’s debt issuance to €10.25bn so far this year.

Currently, the figure sits at €6.25bn. The NTMA has opted to borrow far more than last year, with the issuance target increased from €9bn to €13bn in 2017 to between €14bn and €18bn in 2018 – partly driven by the Government’s debt-refinancing schedule – with €8.9bn set to mature in October, close to €15bn in 2019 and under €20bn due in 2020.

But as market sources emphasise, the NTMA is also spurred on by the looming conclusion to quantitative easing, the expansionary monetary policy that has helped drive interest rates to record lows. Barclays, Cantor Fitzgerald Ireland, Goldman Sachs, HSBC, NatWest Markets and SG BIC are the joint lead managers of the looming auction.