The National Debt


#347

More likely an interest payment.


#348

The national debt clock page is just an estimate.

From the site

Clearly that’s not the way the national debt changes in reality.


#349

Tomorrow they will auction a 10 year 0.9% Treasury Bond 2028 , c€1.2bn.

I predict bids for this paper will cover this issue around 1.8 to 2.5 times. Plenty of demand in other words.

Sometime next year, around June or so, they will retire a c.5-10 year issue on which the interest payable is 5% or so. All the 2018 redemptions were funded by April this year. The blended interest rate is now below 3% on the total pile , EG under €6bn annual servicing, that was nearer €8bn some time ago.

The blended interest rate will drop in the next 2 years and will then stabilise long term around 2.2-2.4%

The blended interest rate on debt issued in 2018 only will end up around 1%.


#350

irishtimes.com/business/eco … -1.3625800


#351

Yes but we have strong fundamentals XX


#352

Ireland’s not even in the top 20 in GDP terms the US No.1 with Japan No.3 (formerly No.2 until out-clipped by China which has the geographical and population size advantage). We seem to feature in the mid 30’s or mid 40’s depending on what charts you look at. This kind of well “we’re not as bad as them so it could be worse”, means in real terms to my way of seeing things, yea it’s worse. So yea fundamentally speaking… XX


#353

The Department of Finance 2018 annual report on Ireland public debt uses modified GNI for the first time and it sends a strong warning about the risks to our debt sustainability.

Ireland’s GDP overstates the capacity of our government to service our debt i.e. to run a primary surplus large enough to meet our debt obligations. We simply can’t increase the level of tax that we collect from the multinationals who contribute so much to our GDP. The Economist EIU reports today that it is unclear whether the necessary measures are politically feasible.

merrionstreet.ie/en/News-Room/Re … _2018.html


#354

The fundamentals certainly *sound *strong, but only because the CB is determined to boost inflatulation


#355

It’s all good and well publishing these reports now but we are so far down the road at this stage its too late. We really should have been looking at this 5 years ago. For a country that was basically bankrupt 8 years ago you’d think debt sustainability and debt reduction would be at the forefront of everyone in powers minds but no, more important was welfare increases, public sector pay increases and tax cuts, all operational expenditure based on windfall taxes (corporation tax) while we were (and are) still running a budget deficit. It is absolutely nuts and just shows that nothing was learned from the last clusterfcuk. When the balloon pops next time, and it will at some stage, we are as badly positioned as were 10 years ago but we have a humongous national debt already this time. Its gonna be nasty but I’m resigned to it at this stage and am trying to best insulate myself from it when it happens. Someone please contradict me and cheer me up.


#356

Can’t contradict any of the above, sorry. But saying about the balloon ‘and it will at some stage’ indicates a belief that the popping is still a long way off, when many indicators are showing it’s already upon us, the sonic boom just hasn’t arrived yet, sorry not to be more cheerful


#357

At least mortgage lending is muted this time and the banks have not been able to go out and ramp up their lending figures.

Because few can genuinely afford to buy at these prices.
So the CBI rules and lack of fresh capital into the banks for new lending is the circuit breaker saving us this time.


#358

Oh I agree, its gonna pop sooner rather than later, I’d give it 18 months maximum.


#359

It may save our banks, may, but it won’t save the huge gap in current expenditure v income that will develop pretty quickly if our tax take drops.


#360

Where is the breathing space to allow countercyclical loosening in the next downturn? We don’t control our interest rates directly.

Perhaps govt should be adding a tax on mortgage payments to act as a brake on the economy.


#361

I think this is probably the only way to get more people on the street than the water charges protests.


#362

Indeed. Although with current talk of full employment there must surely be a place for basic economics in the discussion. The closest I’ve heard to a discussion of tightening is talk of a rainy day fund which is depressingly stupid.


#363

Again people are overcooking the reality. Debt issued as recently as last week at 0.8% interest. The hump of debt repayments due in 2019 and 2020 will be fully financed in 18 months, latest. We (oddly) pay nothing off in 2021 as things stand. We are rid of the remainder of our more expensive debt in 2020.

This more expensive debt, it is all sovereign debt, costs us c.5% interest per annum and amounts to around €30bn of the total €200bn right now. In other words that €30bn that we will retire very soon costs as much to service as €100bn of the Draghi era paper, every single year.

Again let me restate the long term reality (we issue mainly 10 year paper nowadays, due 2028 in other words). This is the ANNUAL position comparing 2007 to 2020 onwards below.

It is, of course, possible that we will pay higher interest on sovereign issues after 2020 when the Dragi effect wears off. But as we only refi around €10bn a year in the 2020s that potential impact is limited. Of our €200bn overall debt, in 2020, we then refi c. half by 2030 and half after 2030.

By and large we will then spend the 2020s paying off a mix of c.2% rated EU bailout funds and c.1% Irish sovereigns. We should not have to pay more than 2% interest on the new sovereign debt we raise even then…leaving us net same as at the end of the 2020s or a tad worse off.

Even if interest rates are 3% on all our sovereign issues after 2020 we are only a billion and a half a year worse off at the end of the decade in 2030 than we are in 2021 and which annual amount is around what we pay now, in 2018.

There is no fucking cliff lads. A steady slow upramp at most. The way things look right now …not even that. :slight_smile:


#364

The ECB has been helicoptering money for over 3 years now and the great wash of money into Eurozone sovereign debt ends in 3 months with fully €2Tr spent on it by the ECB. They bought another €500bn of corporate debt etc too.

To recap the programme.

March 9 2015 (decision to purchase €60 bn of assets per month until Sept. 2016),
December 3 2015 (decision to extend the QE @ €60bn a month until March 2017),
March 10 2016 (decision to further increase monthly purchases from €60 bn to €80 bn from April 2016)
December 8 2016 (decision to then extend the QE until December 2017 at a reduced monthly pace of €60bn).
October 26 2017 (decision to further extend the QE until September 2018 at a reduced monthly rate of €30bn)
June 10 2018 (decision to extend the QE for 3 months until December 2018 at a further reduced monthly rate of €15bn)
24 December 2018. END

At peak it was almost all sovereign, the corporate bonds were mainly purchased in 2017/8 and sovereign purchases declined somewhat as a % of the total.

There has been no significant change to Irish bond yields since the steady reduction from €80bn of monthly purchases to €30bn (now) started almost 2 years ago. Ireland accounts for 1.5% or so of the purchases to date, €29bn of €2Tr. We will end up with the ECB itself holding around €30bn of the €200bn national debt in December when the whole process stops. Maturity is around 9 years average.

It will be interesting to compare todays 8 10 and 12 year rates with those obtaining in January 2019 mainly because Brexit will be that bit nearer and no less messy than today but I think there will be no substantial changes unless there is a fiscal shock to Ireland in H2 2019 which is when the first move upwards to the base rate (and tracker mortgage rates) will be contemplated for the first time.

Normalisation, a base rate of 2-3%, is many years away, think mid 2020s.


#365

The NTMA is finally moving into raising funds for infrastructure. They are calling these greeen bonds and the following infrastructure is to be targeted.

ntma.ie/wp-content/uploads/2 … mework.pdf

I would guesstimate they will need €10bn out to 2025 and the first debt raising is due in December…by syndication. Irish Water will be the beneficiary of the initial syndication which will be in the order €2-3bn …IW can easily service such a loan out of their cashflow. :slight_smile:

There are fuzzier greeny looking investment targets where cashflow will simply not be forthcoming but the NTMA don’t want to frighten anyone until they get a benchmark issue off first. :smiley:


#366

@2Pack
The quality of our debt profile has improved, we’ve been fortunate in that regard.
How do you suppose we deal with the quantity?