Ireland raises €700m in benchmark debt to fund Covid-19 crisis at lowest cost in history of State

Conor O’Kelly, CEO of the National Treasury Management Agency (NTMA), speaking at the Ireland Strategic Investment Fund (ISIF) 7th annual market engagement event, taking place today at Convention Centre Dublin. Picture: Conor McCabe Photography.

The NTMA has raised €700m for 10-years at a negative rate of -0.025%, marking the lowest cost in history for the State to tap a benchmark 10-year bond in international government debt markets.

The sale was part of a wider auction of debt in which the Government debt agency raised a total of €1.5bn on Thursday, including €300m which it will have to pay back in 30 years but at an ultra low-interest cost of only 0.6%.

Negative interest rates for benchmark bonds means that investors are willing to pay the State for the privilege of holding their money even as governments pile on debt during the Covid-19 pandemic. It speaks to the sale of the global economic crisis created by the economic crisis.

The NTMA is well on its way to raising up to €24bn it wants from sovereign bond investors this year which will go to fund the Government’s looming budget deficit of up to €30bn.

Many governments in the eurozone can borrow at negative or at historically-low interest rate levels helped by the huge the programme of buying sovereign bonds by the ECB.

The Government in April said it expected its debt-servicing costs to fall to €3.59bn this year from the €4.46bn it paid out in interest payments in 2019, as debt issued at much higher interest payments mature. This comes despite the huge build-up of overall debt to fight the Covid-19 fallout.

For 2021, the Government has projected only a modest increase in debt servicing costs, to €3.75bn.

New Central Bank figures on bank payment breaks for households and businesses also showed the “unprecedented” extent of the fallout from the Covid-19 crisis.

Lenders regulated by the Central Bank have so far granted payment breaks in the Republic for 62,480 owner-occupier home loans covering €9.6bn in mortgages, or almost 10% of all such lending, new Central Bank figures show.

The lenders include banks, credit services firms that work for the so-called vulture funds, as well as credit unions.

The figures come amid a row between Sinn Féin finance spokesperson Pearse Doherty and Brian Hayes, the chief executive of the banking industry group Banking Payments Federation Ireland, over the accrual of interest payments during the payment breaks.

A significant share of firms in manufacturing, property, retail and accommodation and food services have also applied for the loan breaks, according to the figures.

“The significant scale of payment breaks speaks to the unprecedented breath of the shock triggered by Covid-19,” the Central Bank said.

Meanwhile, CSO figures showed that prices across the economy rose by 0.3% in June from May but were 0.4% lower than June 2019. Private rents fell 0.3% in the month and are now 1.2% lower than June 2019, while mortgage interest costs were unchanged in June but were 2.9% above their June 2019 levels. The costs of car insurance fell 1.1% in the month and were 7.6% below June 2019 level, according to the figures.