Latest figures from NAMA say that they issued €28.6bn of NAMA bonds in 2010
These bonds are listed on the ISEQ exchange. If we look at the NAMA page there we can see that all the bonds issued mature on March 1st 2011.
Now, the boys over at irisheconomy have highlighted the fact that the ECB are less than happy about refinancing the NAMAbonds, but they are doing it nonetheless.
It does leave open the possibility that the ECB will eventually call a halt to this arrangement. I think this is unlikely, but if the ECB did pull the plug, it may mean that there would be nearly €30bn of debt looking for a repo in March.
All clear so far?
Because, as is becoming usual with debt operations in Ireland, there may be some mud in the water.
Let’s have a look at data produced by the Central Bank of Ireland, specifically table A.4.1 ‘Credit Institutions (Domestic Group) – Aggregrate Balance Sheet’ (excel)
In assets side, under ‘Loans to Irish Residents’ we find column 18 – General Government. It is an interesting dataset.
Maybe I am being naive here. Maybe I am adding 2+2 and getting 5.
But, it seems that domestic bank lending to ‘general government’ has increased to unprecedented levels in line with issues of NAMAbonds. Could it just be a fluke? Seems unlikely.
What is mystifying me is why that number is turning up in that column.
If the banks were buying the NAMAbonds (that are then used to pay for the assets NAMA is buying from those same banks) surely that figure would appear in ‘holdings of securities issued by Irish residents’, specifically under the ‘private sector’ column – as NAMA is still classified as a private institution.
True, that column (number 23 on the spreadsheet) too has climbed by €20bn since March. But not in the same way as the lending to general government has.
I’m speculating here (there is a comments section below to give your own opinion/set me straight) but it seems that the banks are lending the proceeds from the ECB liquidity back to the government. Why would they be doing this? Especially as the bonds do not start life as government debt, instead they start from an independent institution (NAMA).
The NAMAbonds are issued by NAMA under a government guarantee. They are structured in such a way as to be eligible as collateral for ECB operations. It all seems very simple.
So why the lending back to the government (or arm of the government such as the NPRF), who’s only involvement is to guarantee the bonds? And what are the government doing with that cash when they get it? Also, what will the government do if the ECB stops the repo operation?