Ireland's refinancing risk may be overstated, says NTMA boss

Ireland's Refinancing Risk May Be Overstated, Says Ntma Boss
Conor O'Kelly said the NTMA strategy, together with the ECB's quantitative easing programme, gave the government time to get its budget back in balance following the COVID-19 pandemic.
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The risks around the cost of Ireland refinancing its increasingly large stocks of cheap debt if interest rates are higher when the bonds begin to mature from 2025 may be overstated, the country's debt chief said on Monday.

While Ireland's debt burden as a proportion of gross national income is well above the EU average, it has stretched out the maturity of the stock of debt to more than 11 years by issuing longer-dated bonds at far lower cost in recent years.

Only two of Ireland's 14 bonds maturing after 2025 have coupons of 2 per cent or higher with the coupons on the four bonds maturing between 2026 and 2029 ranging from 0.2 per cent to 1.1 per cent.

“Obviously this does produce refinancing risk, however we think that the refinancing risk might be overstated,” Conor O'Kelly told a news conference, citing the maturity profile of the debt which is among the longest in Europe.


“Only 5 per cent-7 per cent of the stock of debt gets refinanced every year and because of that, even if interest rates were to go higher in the second half of the decade, it would take quite some time for that to come through in terms of the annual interest bill.”

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O'Kelly said the National Treasury Management Agency (NTMA) strategy, together with the European Central Bank's quantitative easing programme, gave the government time to get its budget back in balance following the Covid-19 pandemic.

The interest bill on Ireland's stock of sovereign debt is set to drop below €3.5 billion this year and remain under €4 billion per year until at least 2025, he added.

“Lots of other sovereigns haven't taken the same approach because of course it's cheaper to fund shorter and lots of sovereigns don't have the kind of cash reserves that we have in terms of forward funding,” he said.

“We have felt over the last five or six years that buying that insurance against future refinancing risk for a small country like Ireland is really, really important.”

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