On Thursday January 11^th, the National Treasury Management Agency (NTMA) raised €3 billion through a syndicated sale of a new benchmark 10-year bond maturing in October 2034. Cantor Fitzgerald Ireland was delighted to be a joint lead manager along with Barclays, BNP Paribas, Citigroup, Danske Bank and J.P. Morgan.

The new 10-year bond was issued with a coupon of 2.6% and was priced at mid swaps +1 basis point, to give a re-offer yield of 2.651% (annual) at a price of 99.535%.

There was strong demand from clients for the new bond from the outset and the final order book closed in excess of €44 billion with orders from over 300 individual accounts. The largest distribution was to the UK at 18.6%, followed by France/Benelux at 18.2%. Spain and Portugal took 14.5%, while German/Swiss and Austrian investors bought 14.3%. Other European regions like the Nordics took 12.6% with Domestic accounts taking 4%.

Investor Types showed Asset Managers accounting for 35.1%, while banks took 32.7%. Central Banks/Official Institutions took 21.4%, Pension Funds and Insurance Companies got 7.9% and Hedge Funds were allocated 3.1%.

Following the issuance of €3 billion in January’s transaction, the NTMA has completed 40% of the mid-point of its €6 to €10 billion bond funding range for 2024. The NTMA find themselves in an enviable funding position relative to the rest of Europe with high cash balances and an expected Exchequer Surplus this year meaning they can choose when to come to the markets again.

Given their lower funding requirements this year the NTMA have announced there will only be one bond auction in the first quarter of 2024 on Thursday the 21^st of March. The auction process will be critical for the NTMA to maintain liquidity on the Irish bond curve this year. The performance of Irish bonds relative to our peers like France and Belgium has been partly attributed to the lower issuance levels in recent years, coupled with Ireland’s impressive fiscal performance. This has seen the appetite for Irish debt remain robust.

The most recent Exchequer figures highlight the strength of Ireland’s fiscal position and subsequent lower funding requirements. There were record tax revenues of €88.1 billion collected last year. Corporate tax receipts which had been under scrutiny following three consecutive months of declines rebounded in November and December and brought 2023’s total corporate tax take to a record €23.8 billion, a 5.3% increase from 2022.

The Irish economy continues to perform well despite the slowdown in global growth and the contraction in Irish Gross Domestic Product (GDP) which is estimated to have fallen by 1.9% in Q3 2023. Looking at Irish growth though and Modified Domestic Demand (MDD) is a much more reliable gauge of the domestic economy’s performance, and that was positive in the third quarter of last year. Employment continues to be a bellwether for the economy and Income Tax grew by over 7% last year. The employment rate hit 74.2% in Q2 2023, its highest point in 25 years.

Whilst there remain many headwinds for the Irish economy in 2023, the strong start to the year for the Irish Government bond market with the NTMA’s well received new 10-year bond is a strong indicator of the current positive sentiment towards Ireland Inc from the International Investor Base.