NTMA taps bond market with ease even as ECB softens stimulus

THE Government has borrowed €1bn on the bond markets, at an effective interest rate of 0.888pc. The auction for the new debt was oversubscribed by would-be investors – who bid 2.5 times the funds sought. The deal, managed by the National Treasury Management Agency (NTMA) added to an existing tranche of bonds that falls due in 2028 and carries a formal coupon, or interest bill, of 0.90pc per year. The yield of 0.888pc takes account of fresh pricing on the long-term investor return. The new money being raised is mainly to replace existing debt. The Government has now raised €13.55bn so far this year, out of a targeted range of €14bn to €18bn. It comes amid an anticipation that borrowing costs are set to rise as the European Central Bank seeks to normalise the financial environment, by withdrawing stimulus measures brought in after the crash that have included massive spending to prop up the bond market. Yesterday, the ECB kept interest rates unchanged as expected, and is staying on track to end the bond purchases this year and raise interest rates next autumn, even as it warned that risks from protectionism were gaining prominence. With inflation rebounding and growth levelling off at a relatively healthy pace, the ECB has been gently removing stimulus, betting that trade disputes, emerging markets turbulence and Brexit are not enough to derail growth. In a subtle shift, the ECB said it would halve its monthly bond purchases to €15bn from October, firming up its previous language, which had said only that such a move was anticipated.