NTMA announce plans to get back to the market for 2014

antoobrien

The NTMA have announced plans to sell bonds and t-bill in order to get back to normal borrowing before 2014. Part of this is a new of bond - Irish Amortising Bonds (IAB).

The IAB will pay back the principle yearly, with the interest being calculated on the outstanding amount, having maturities of 15, 20, 25, 30 & 35 years.

http://www.ntma.ie/Publications/2012/IABInformationMemorandum.pdf

Scofflaw

Oooh...shiny!

dazzled,
Scofflaw

...probably shouldn't have read that information note...

Cookie_Monster

1. Make small meaningless cuts and continue to have huge deficit
2. Go back to the markets and borrow lots once again
3. ?
4. Profit

Dave!

Is there an advantage to borrowing from the markets over borrowing from the IMF? Won't we be paying a higher interest rate?

Is a second bailout the worst thing in the world? Sure we'll restore a bit of independence, but surely the plan is to continue to reduce the deficit anyway, so why not do it while borrowing at a lower interest rate?

And sure if we're in a position to borrow from the markets anyway, then really couldn't we get out of an IMF programme at any point during it?

Possibly playing devil's advocate here, I'm sure there's some reason why everyone is so keen to get back to the markets, I'm just not aware of it...

antoobrien

Dave! wrote: »

Is there an advantage to borrowing from the markets over borrowing from the IMF? Won't we be paying a higher interest rate?

The lack of attached strings. Pay a couple of % more interest, don't have to consider taking on the pensioners again.

Dave!

Don't the bailout programmes just tell us to meet deficit targets though? It's up to the government to decide how these are met. I suppose we might have more liberty in terms of the length of time we can take to make the adjustment, but if we can't reach deficit targets eventually (and do sensible things like means test social welfare payments and reduce public service burden on the exchequer), aren't we doomed anyway?

Some self-imposed fiscal requirements might be good for us in the long run if they're reasonable and agreed in advance. If we can't agree a reasonable term with the troika, then we can go to the markets, but couldn't it be the first port of call? The government is in a big rush to get back to the markets so that they can say "see? we've completed a programme, and now we have fiscal independence again!"

Good for an election, but best thing for the country?

antoobrien

Dave! wrote: »

Don't the bailout programmes just tell us to meet deficit targets though? It's up to the government to decide how these are met.

If we don't measure up they (Troika) can withhold funding. If we borrow from the markets, we've got already the money.

Dave! wrote: »

I suppose we might have more liberty in terms of the length of time we can take to make the adjustment, but if we can't reach deficit targets eventually (and do sensible things like means test social welfare payments and reduce public service burden on the exchequer), aren't we doomed anyway?

Would you rather be have been at the mercy of the markets asking us for 3-5 times what the troika were asking for money this time last year?

Dave!

antoobrien wrote: »

If we don't measure up they (Troika) can withhold funding. If we borrow from the markets, we've got already the money.

Yeah but

(a) If we agree a reasonable programme then we should be measuring up. It's not an emergency situation now (assuming we have the option to borrow from the markets), so couldn't we agree on something gradual?

(b) If we do fail to measure up, then we could go to the markets anyway, couldn't we?

antoobrien wrote: »

Would you rather be have been at the mercy of the markets asking us for 3-5 times what the troika were asking for money this time last year?

I don't know what you mean here.

antoobrien

Dave! wrote: »

Yeah but

(a) If we agree a reasonable programme then we should be measuring up. It's not an emergency situation now (assuming we have the option to borrow from the markets), so couldn't we agree on something gradual?

By all report we are, however all we've done so far is take the loose change out of our pockets.

Dave! wrote: »

(b) If we do fail to measure up, then we could go to the markets anyway, couldn't we?

Not really, if we measure up they'll charge us obscene interest rates. Just take a look at the Greek bond rates each time they miss a target.

Dave! wrote: »

I don't know what you mean here.

Last July (2011), depending on the bond in question, the bond yields were 15%-25%.

Dave!

antoobrien wrote: »

By all report we are, however all we've done so far is take the loose change out of our pockets.

I presume your suggestion here is that we're not doing enough in terms of an adjustment/we're just going for the low-hanging fruit? Wouldn't going back to the bond markets rather than going into another programme just make us less motivated to implement cuts?

antoobrien wrote: »

Not really, if we measure up they'll charge us obscene interest rates. Just take a look at the Greek bond rates each time they miss a target.

Interest rates might possibly go up a bit, but I don't think we can compare Greece to Ireland given that Ireland has been relatively stable for a while now and has good prospects for the future, while Greece has been a mess for ages and will continue to be. Surely the markets would see the difference between the two.

antoobrien wrote: »

Last July (2011), depending on the bond in question, the bond yields were 15%-25%.

I don't think I said anything about that though.


edit

This is probably moot anyway, I wouldn't think there will be any money left for Ireland after Spain and Italy get bailed out

antoobrien

Dave! wrote: »

I presume your suggestion here is that we're not doing enough in terms of an adjustment/we're just going for the low-hanging fruit?

Kinda, we've taken the easy decisions - now it's time to take the hard ones.

Dave! wrote: »

Wouldn't going back to the bond markets rather than going into another programme just make us less motivated to implement cuts?

Not necessarily - if we don't keep implementing policies that will ensure we can either pay back or refinance our borrowings the markets won't loan to us. It's part of the reason that yields went up in 2010 - the markets didn't think we were doing enough. Now, despite the fact that the programme is not radically different, we're held in a better light by the markets (mostly because the previous and current governments actually carried through with what they said.

Not really, if we don't measure up they'll charge us obscene interest rates

I hope the original text didn't confuse you too much, that's how it should read.

Dave! wrote: »

Interest rates might possibly go up a bit, but I don't think we can compare Greece to Ireland given that Ireland has been relatively stable for a while now and has good prospects for the future, while Greece has been a mess for ages and will continue to be. Surely the markets would see the difference between the two.

They do recognise the difference, but it is a warning for us: Hit your targets or we will have to do this to you. Most of our problems have been caused by external factors e.g. all 2011 was down to problems in other countries because we kept hitting the targets set out for us.

Dave! wrote: »

I don't think I said anything about that though.

No you didn't but it is relevant - if we had not had support from the troika at the time, that would have been the cost of borrowing to pay for the defecit.

If we had chosen to borrow even half of what we needed, it would have meant an effective overnight doubling of the interest payable on the debt. That would have resulted in sharper cuts to the exchequer as we would have had to cut and still pay interest and refinance bonds.

BeeDI

If only we could have Charlie Haughey back in the drivers seat:) He would appoint Ray McSharry to finance, and the knife would come into play:D

roro2

Bond switch announced today - switch from the 2013 and 2014 bonds into 2017 and 2020 bonds. The 2017 bond will yield 5.90% and 6.10% for the 2020. The NTMA will also sell the new 2017 bond outside the switch terms.

Interesting to see the take-up levels. The terms seem reasonably generous. International participation will be key.

Medu

antoobrien wrote: »

The lack of attached strings. Pay a couple of % more interest, don't have to consider taking on the pensioners again.

I also can't see the point in this. The strings are still there it's just that they aren't in writing. Borrowing at higher interest rates(by a factor of 2) will just mean more cuts/taxes, not just in the long term but the short term as well. The only reason our interest rates have been falling is because we have been moving towards a more sustainable budgetary situation.
Also having the IMF here should make it easier to move against the sacred cows as government can just point the finger. Maybe Europe is putting pressure on the government to show it's wiliness to move away from European funding?

antoobrien

Medu wrote: »

I also can't see the point in this. The strings are still there it's just that they aren't in writing.

The difference being the troika are looking for reforms in return for giving access to funds, the markets could care less as long as they think they will get their money back.

Let's be very clear about this, the troika funding is emergency funding - we can not count on it being continually available (which some people think it will be) after the end of the current program next year.

Medu wrote: »

Borrowing at higher interest rates(by a factor of 2) will just mean more cuts/taxes, not just in the long term but the short term as well.

We're only talking an extra 300m - 500m per year. Slap on extra 2% on savings and pension funds to discourage saving and encourage spending (hence vat). Easy enough to make it fly for the perception that we have our sovereignty back (as if it ever went away in the first place, he bank merely changed the t&c).

Medu wrote: »

The only reason our interest rates have been falling is because we have been moving towards a more sustainable budgetary situation.

Is one having a laugh?

Take a look at the exchequer statements for spending
Year | Current Expenditure
2008 | 44.69
2009 | 45.25
2010 | 47.02
2011 | 48.02


That spending pattern is no more sustainable now than it was at any stage during the crisis. I've left out the capital spending on account of it being skewed by the payments to banks (over half the total 2011 capital budget).

Also the cuts have only really affected capital programmes. Where they have been applied to current spending it's been in areas not traditionally funded by the state (e.g. carers, special needs assistance) instead of attacking the inefficiencies inherent in the system (i.e. means testing of benefits).

The reason we're seeing lower rates is the prospect of a debt deal. If that goes south, watch the bond yields rise.

So forgive me if I think you're not seeing the picture, because the markets are actually seeing us tax our way out of it - tax has gone from €33.8bn in 2009 to €36.8bn in 2011 (after a spectaular collapse in 2008).

Medu wrote: »

Also having the IMF here should make it easier to move against the sacred cows as government can just point the finger.

Not going to happen for one reason - the Labour party. There's no prospect of the kind of cuts and reforms that are needed because thay are labelled regressive. I have no problem saying I voted for FG hoping they'd get an overall majority because of the faffing about that has resulted due to the need to keep Labour happy.

I'd have no problem paying more taxes if I knew it wasn't going to bankroll 4 biggest charities in the country - PS pay, SW, Health & educational salaries (80% of the dept of education budget goes on salaries).

Medu wrote: »

Maybe Europe is putting pressure on the government to show it's wiliness to move away from European funding?

Europe is encouraging us to spend sustainably, the sources of the funding don't matter or the IMF would not be involved, as they are loaning us money for 10 years.

ardmacha

Investors have committed a total of €5.23 billion into longer-dated bonds maturing in 2017 and 2020.

The NTMA says of this, some €4.19 billion was new money for the purchase of the two longer-term bonds on offer - a new 5 year bond maturing in October 2017 and an existing bond maturing in October 2020.

A further €1.04 billion was for the exchange of their holdings of the shorter-dated 2013 and 2014 bonds into the 2017 and 2020 bonds.

The 2017 bond carried a yield of 5.9% and the 2020 bond a yield of 6.1%. The weighted-average yield on the combined transaction was 5.95%.

antoobrien

The NTMA have sold €1,021.3m of the new Irish Amortising Bonds* in a tap issue**. The maturity ranges between 15 & 35 years, with an average yield of 5.91%.

Today’s transaction combined with the bond switch and outright sale transaction of 26 July 2012 and the bond switch transaction of 25 January 2012 has in effect reduced the original “funding cliff” of €11.9 billion (due to the January 2014 bond maturity) by 80% to just under €2.4 billion.”

* Amortising bonds are paid back in equal annual payments over the lifetime of the bond.
** The NTMA set the price and buyers indicated how much they'll take at that price. In a normal issue/auction, price is set by level of demand.

While this is a small amount of money, it is important to note that these bonds are targeted at the Irish pensions market to help meed new requirements brought in this year.

Godge

Why isn't this all over boards as good news?

The funding cliff of 11.9 billion reduced to 2.4 billion, that is about half of the money we need in 2014.

What happened the "we are going to default by the end of the week" people from two years ago, the McWilliams and Gurdgievs of this world?