The NAMA bonds … msheet.pdf
(Courtesy of BoE/D_E).

The horror, the horror.

Twice a year from now 'til eternity, the state will endure rollover risk…


I remember asking about this on AAM a few months ago when there seemed to be a lot of confusion over the term sheet for the bonds.
I think it was a hot button for Joan Burton at the time.

I remember someone downplaying the interest rate risk using the argument that, on a simple assumption that the bonds were FRNs with
6 month resets and 0.5% above LIBOR rates and assuming 50% of the loans were performing then the margin on the collection of
loan interest versus the bond coupons (assuming a minimum interest rate on the property loans being 2% - and higher in Anglo)
would offset any interest rate risk.

Based on the new information which gives more clarity to the term structure of the NAMA bonds how does the above argument
which claims to mitigate the risk on the interest rollovers stack up ?

disclaimer: I’m barely financially literate on bonds, finance , etc. I’m Joe Public / taxpayer just trying to get a hold on the risk
inherent in these bonds/instruments.

Jeepers, more feckin’ literate than me :smiley:

I can see the risk in terms of rollover - rolling over 54 bn every six months. Not in terms of cost, I usually have a look at what Mr. Gurdgiev is saying for that. So we’ll have to wait until he posts something on it!

Rolling them over every 364 days.

im im im… im speechless but as stated in another topic the only was this makes sense is if they are running for the exits…

ps watching seanad tv dan boyle sitting beside donnie, christ he looks like he ate his wig…

Anyone got any links offhand of FF gombeens telling us about the special interest rate NAMA would be getting?


There isn’t roll-over, the notes have a 10year maturity. It is the interest rate that resets periodically.

There’s no spread above 6M euribor? Unless ECB allow repo, these won’t fund themselves.

The subordinated bonds have a ten year maturity but I think the senior notes have a 364 day maturity.

I’m reading the termsheet linked by Yogan. These FRNs are 95% of the acquisition portfolio, so that looks like the main nama bond. They have a ten year maturity.

The 364 day maturity seems to relate to at the 10year maturity, the issuer has the option to issue new notes (of 364 day maturity) rather than redeem for cash.

And where do you see the 10 years?

You’re right. I read it late last night and must have seen what I’d expect rather than what was there.

Either way, it amounts to the same Interest risk. Do short maturities benefit the way banks would value these on their balance sheets?

Any termsheet for the subordinate bonds? It will be interesting to see how and when losses are assigned.


No indication of how the interest or capital payments are to be determined.

So we have no idea when these bonds are going to be called in and we have no idea what the other 77% of loans taken on in the first tranche concern?

We will complete about 16% worth of transfers (some say 20% but I’m just dividing 8.5 / 54) within the next week and if that profile is continued then lord knows what we are getting.

3.2 BN of loans in the UK? Are they land? Are they what?

Murkier and murkier…

Jesus, that’s vague. They might be real a gift or worthless to the banks.

what are the criteria?

on redemption:

again, what are the underlying definitions.

I think the 20% is coming from the revised nominal value of the loans being 81 billion up from the original estimate of 77 billion (4 billion in interest?). If the first tranche loans had a nominal of 16 billion then that’s 20% transfered yesterday.

Yes, sorry, six month resets and 1 year maturity.

So two exposures to interest rate risk - no averages used (I’d have thought average of previous 30 days would have been okay to smooth?).

Am I right that they all have the same issue date, so the same rollover date? Or will they be spread through the year?

Right bond dummy here. I know how a plain vanilla bond works and how it can be priced assuming a certain yield. While I know how a floating rate bond works I was wondering how these are priced

Plain vanilla fixed interest bond: 10 year bond, annual coupon of 5%. Issued at 4.5% yield => a price of 103.96 per 100 nominal (I think :slight_smile: )

Here we have a floating rate bond (assume a euro denominated one). Coupon is Euribor + 0.5% over 10 years

To price this to a certain yield we need to assume what Euribor will be at every coupon date. I assume there is some form of forward yield curve for Euribor?

Is this how they are priced? And if so are they priced to a specific yield of are the cashflows discounted at the forward Euribor curve

Basically what I’m trying to get is, we issue a NAMA bond that can be redeemed at 100 in 10 years, pays a certain coupon. What price are they issued at and therefore for every 100 the banks get how much nominal do we need to issue? Or is it simply a case that each 100 nominal is issued at a face value of 100 and the implied yield depends on the forward Euribor curve asumed?

Hope I’ve made my dilemma clear here to the bond pricing experts 8DD

More tragi-comedy!!

As Lucey pointed out NAMA now has the same business model as Anglo had: borrow short to buy long and shovel the money into dodgy real estate.

Isn’t one definition of lunacy supposed to be repeating a set of actions with the expectation of a different outcome next time?

Never mind Anglo. The Irish banks with their repo strategy have all been doing this and this is why it was evident from the time Northern Rock got into trouble that the Irish banks would get into the same trouble. Anyway, forget Anglo or even the Irish banks; think about what other institution in the state is borrowing short…

Thanks Yogan for reminding me of Constantin Gurdgiev’s blog.
I’ve just seen his analysis of the NAMA funding issue here

He hits the nail with his amusing (yet worrying) quip “(putting Frank Fahey’s ‘free lunch’ funding out to new tender annually…”

The issue about the untaxed status of those bonds goes above my head. Can you dissect this a bit further ?
i.e who is bearing the cost as a result ? (I assume it is the state). He gives the example of the bond holders (i.e banks) selling
on the bonds and not having to pay tax for them. Not sure how that is a lost opportunity for the state, etc ? Probably obvious…

Also is it correct :open_mouth: that as per Greg’s comment over at Irish Economy (link that the yield curve/interest risk is being hedged with the cashflow of the performing loans transferred to NAMA and that the ultimate credit risk for that arrangement lies with the taxpayer. Time for some brandy on Good Friday, I think …
I wonder who won the rugby. I haven’t got Setanta XD