# NTMA statement on anticipated borrowing requirements



## Brendan Burgess (25 Mar 2020)

*25 March 2020*
Ireland is well placed to increase its borrowing activity in the coming years arising from the economic disruption relating to the Covid-19 pandemic, the National Treasury Management Agency (NTMA) said today.

This increased borrowing activity will be as a result of measures by the Irish Government aimed at stabilising Ireland’s economy and addressing the economic challenge.

This additional borrowing will take place against a backdrop of a strong improvement in Ireland’s debt position in recent years, which has been reflected in a solid trend of lower borrowing costs, strong demand for Irish sovereign debt among international investors over a protracted period and ratings upgrades by each of the major credit rating agencies.

*Conor O’Kelly, NTMA Chief Executive, said:*

“_The strong progress Ireland has made improving its debt profile over the past five years leaves us well placed to address any borrowing challenges posed by the economic fallout of Covid-19.

We have the benefit of strong international investor appetite for our debt and a supportive interest rate environment that is underpinned by favourable interventions of unprecedented scale by the ECB and other authorities.

Our strategy in recent years of prefunding liabilities means we have already built up strong cash balances. In line with this strategy, at the end of February we had €26 billion to fund this year’s €19 billion of redemptions.

Five years ago the average interest rate on our national debt was close to 4%; it is currently on course to fall below 2%. Five years ago our annual interest bill was over €7.5 billion and is now close to €4 billion.

Between 2017 and 2020 the NTMA has had to fund €70 billion for bond redemptions. Fortunately with no bond redemptions in 2021 and much lower overall redemptions totalling €27 billion from 2021 to 2024, we are well positioned to meet the borrowing requirements and challenges presented by this economic crisis”._


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## NoRegretsCoyote (25 Mar 2020)

Brendan Burgess said:


> *“*_*The strong progress Ireland has made improving its debt profile* over the past five years leaves us well placed to address any borrowing challenges posed by the economic fallout of Covid-19._



What total rubbish!  CSO figures in billions below on general government gross debt at year end for each year til end-2018. There's barely any change!


*2014**2015**2016**2017**2018*203,378201,654200,709201,363205,978

Source.

2019 numbers will be published in a few weeks but won't show much change I suspect.


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## vandriver (25 Mar 2020)

Does the debt profile not relate to the redemption date and interest rates,rather than the actual amount?


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## Protocol (25 Mar 2020)

Yes, I'd say profile refers to the maturity profile, the redemption profile.


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## Brendan Burgess (25 Mar 2020)

And also the level of debt as a percentage of GNP* 

Brendan


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## Sunny (25 Mar 2020)

This is just going to get ridiculous. Individual countries will not be able to solve this through debt. Italy and Spain, two of the largest EU economies are going to be decimated. Probably France as well. Add in the problems to Countries like the UK and the US, the idea that everyone will simply be able to borrow to pay for this is ridiculous. So we borrow for this. What happens if the same thing happens in the next couple of years? Borrow again? There needs to a completely new playbook for this.


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## Fidgety (25 Mar 2020)

Sunny said:


> There needs to a completely new playbook for this.



Which may give birth to the aptly named 'Corona Bond', not that the Germans will be too interested.


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## Purple (25 Mar 2020)

Fidgety said:


> Which may give birth to the aptly named 'Corona Bond', not that the Germans will be too interested.


Germany has been playing "Beggar your neighbour" for over a decade by running massive budget surpluses.


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## Purple (5 May 2020)

Given that the ECB is offering money at a -0.5% rate should be be refinancing our existing debt now?


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## Protocol (5 May 2020)

Govts don't borrow from the ECB, so any ECB interest rate is not what the Govt pays to borrow.

But yes, rates on ST Govt debt are negative, yes.

But you can't replace all existing 200bn of public debt with 200bn of 1 year bills, to be all repaid in one year.

There isn't 200bn of demand for our public debt.

Similarly, even if 5yr bonds are currently trading at 0.25%, we can't issue 200bn of 5yr bonds now to replace all existing public debt.


However, we have been, and continue to replace older more expensive debt with new, cheaper debt.


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## Protocol (5 May 2020)

Purple said:


> Germany has been playing "Beggar your neighbour" for over a decade by running massive budget surpluses.



German fiscal balances, ok no deficits, but I would not call them massive.

Eurostat data tec00127



			https://ec.europa.eu/eurostat/databrowser/view/tec00127/default/table?lang=en
		


2011 = -0.9
2012 = 0.00
2013 = 0.00
2014 = 0.6
2015 = 0.9
2016 = 1.2
2017 = 1.2
2018 = 1.9
2019 = 1.4


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## Zenith63 (10 Sep 2020)

NTMA raise €1.25bn, most at negative interest rate
(https://www.irishtimes.com/business/economy/state-sells-1-25bn-in-long-term-debt-1.4351499?mode=amp)

Article states it was over subscribed as usual, any reason they would not fill their boots at these kinds of interest rates, given we know we’re going to need a looooot more in the coming months anyway? Expectation that rates might go lower?


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## Romulan (10 Sep 2020)

I have an awful sense of Deja Vue.

Back to before the last crash and I recall all the talk about pre-funding being in place for the next year and so on and so forth.


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## SPC100 (11 Sep 2020)

Ntma have been doing that over last few years, so my understanding is the weighted interest we pay on the debt is much lower than it was. Or if you like, our debt servicing costs fell considerably even though our debt didn't change that much. That is the reasoning behind why we can afford more debt.

If you take on too much, or had a risky set of repayment dates, I assume market will look for higher interest rate. 

But I assume they are looking to take advantage of low current rates.


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## NoRegretsCoyote (11 Sep 2020)

Romulan said:


> I have an awful sense of Deja Vue.
> 
> Back to before the last crash and I recall all the talk about pre-funding being in place for the next year and so on and so forth.



Indeed, if market sentiment is against you there is nothing that fancy debt management can do.


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## Zenith63 (11 Sep 2020)

This is kinda my question though.  The market sentiment must surely decline in the coming 12-24 months as the costs of C19 become apparent and we load up on more debt, why would they not take every penny they can now? Is there a downside to debt at zero or negative rates that I’m not seeing?


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## NoRegretsCoyote (11 Sep 2020)

Countries want a smooth redemption cycle.

You don't want to have to refinance half your debt over three months.


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## Zebedee (11 Sep 2020)

Is there any reason why we aren’t issuing more 100 year bonds? I think the Austrian one has a redemption yield of <1pc (not sure if this number is up to date). Even Argentina got one away a few years ago (it was oversubscribed by those with short memories).


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## NoRegretsCoyote (11 Sep 2020)

Zebedee said:


> Is there any reason why we aren’t issuing more 100 year bonds?



It's a very niche product. You would want an investor base with a particular need, and I doubt that this is the case for Ireland.


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## Itchy (11 Sep 2020)

A small point, with negative yielding debt, there is still coupons to be paid. Its not a case of being risk free until redemption. For example, the most recent negative yielding debt has a coupon of 1.35%. Minor in the grand scheme of things, but still.


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## Protocol (11 Sep 2020)

Yes, although recent new bonds have very low coupons, surely?



			https://www.ntma.ie/government_bonds/Outstanding-Bonds-Report-2020-09-10.pdf
		


I see a bond maturing in 2030 with a coupon of 0.20%.


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## NoRegretsCoyote (12 Sep 2020)

Protocol said:


> Yes, although recent new bonds have very low coupons, surely?
> 
> 
> 
> ...


Indeed, negative yield over some maturities means in effect that they pay you.


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## EmmDee (21 Sep 2020)

Protocol said:


> Yes, although recent new bonds have very low coupons, surely?
> 
> 
> 
> ...



It's the total yield calculation that matters. So you could issue a bond now that pays 10% annual coupon for example. In that case investors will pay a significant premium on the face value which would make the yield low - in effect you raise more capital than the face amount but still pay the 10% each year


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## NoRegretsCoyote (21 Sep 2020)

EmmDee said:


> So you could issue a bond now that pays 10% annual coupon for example. In that case investors will pay a significant premium on the face value which would make the yield low



Does Ireland issue these kind of bonds?


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