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NTMA: Ireland set for bailout exit

Thursday, January 24 15:39:01

The National Treasury Management Agency (NTMA) will focus on stepping up its re-engagement with the market in 2013 so that Ireland can exit the bailout on schedule at the end of the year, its Chief Executive said today.

Speaking to the Oireachtas Committee on Finance, Public Expenditure and Reform John Corrigan said this would be achieved through the raising of approximately E10 billion during the year, subject to market conditions.

Mr Corrigan added that raising E2.5 billion through a successful debt issue earlier this month meant that the NTMA was already a quarter of the way towards this target.

"Raising E10 billion would give the NTMA - and investors - the comfort of having a full year's advance funding in place," he said. "Such funding 'visibility' is vital if Ireland is to successfully exit the programme at the end of this year."

Mr Corrigan said Ireland is currently in an investment "sweet spot" as positive sentiment towards Ireland is growing and investors are generally becoming more comfortable with a greater appetite for risk.

"I am encouraged by the positive start to the year but it would be unwise to be complacent", said Mr Corrigan. "Markets do not necessarily move in a straight line and investor sentiment can be fickle."

He also said the NTMA is likely to proceed with a syndicated issue of a longer-term bond prior to resuming scheduled bond auctions, although it will remain adaptable in light of market circumstances.

Mr Corrigan added that Ireland has made "very considerable progress" in re-engaging with the markets. The successful elimination of a so-called "funding cliff" represented by a scheduled bond repayment of almost E12 billion in early 2014 was viewed positively by investors and has removed a major obstacle to achieving a smooth exit from the EU/IMF programme.

More than 200 institutional investors placed orders totalling more than E7 billion when the NTMA sold five-year bonds totalling E2.5 billion earlier this month, with strong demand from the UK, mainland Europe and the US, he said.

Last week's auction of three-month Treasury Bills raised E500 million and was the fifth such auction since the NTMA resumed these auctions last July. The bills auctioned last week were at an annualised equivalent yield of 0.2pc - compared with 1.8pc in the first such auction in July.

In absolute terms, yields on Irish bonds are at low levels but spreads against Germany remain high. This reflects differences in the credit ratings of the two countries but another factor is that Germany's extremely low yields are driven by its status as a safe haven investment, the NTMA chief told TDs.

In 2012, the NTMA's engagements included bond switches (totalling E4.5bn); the issuing of conventional bonds (E4.2 billion) and the issuing of Irish Amortising Bonds, a completely new debt instrument aimed at meeting the needs of the Irish pensions industry (E1.0 billion).

The National Pensions Reserve Fund (NPRF) is refocusing its investments towards commercial investments in Ireland. It played a significant role in developing three new long-term funds, announced recently, that will provide E850 million of equity, credit and restructuring/recovery investment in Irish SMEs and mid-sized corporates, he said.