Can we stick to numbers in this thread, not tedious political bollox. Ta!
The annual cost of the debt peaked at near €8bn per annum in 2014. While the debt istelf also peaked in 2014 we have started the process of sweapping out EXPENSIVE debt for cheaper debt, The IMF debt at 4-5% interest was replaced by sovereign long term issuance at sub 2% as an example. We have many 10s of Billions of debt that is eminently refinancable at better rates.
The difference between the numbers below (€7.7bn and 8bn) is interest paid out on state saving schemes.
2012 2013 2014
6,135 7,681 7,966
What we now need to do is work on reducing the interest cost without necessarily paying any debt off in 2016 or 2017. Therefore the cost of servicing the debt ( the €7,7bn) should have dropped some in 2015 when the NTMA annual report comes in and the number should go below €7bn in 2016 final despite the overall debt remaining the same. If we carried all our debt at 2% interest the the cost would be around €4bn a year rather than nearer €8bn.
We have wiggle room, given the scale of Eurozone QE, to issue as much as €15bn sovereign in 2016 and to retire more expensive sovereign and bilateral and early Euro bailout funds, especially the ones falling due in 2019 and 2020 when the debt profile looks a tad spiky and with a large €20bn repayment commit in 2020 in what could very well be a less benign environment for issuance.
We should take that opportunity and crack into it while we can. I think 2016 and 2017 will be good years and cannot really see beyond that. I also think there is one more large AIB repayment due like the €1.7bn one that balanced the books in December 2015 but that will be wasted on health and pork no doubt.
Noonan Lied, that money was spent in a supplementary budget in November and the €1.7bn was used to avoid ISSUING MORE DEBT in effect. To get more money out of AIB thereafter we have to sell the turd off. It could clear as much as 10% of the national debt overall.
There is an ‘understanding’ that you comply with the ‘programme’ when you are in a deficit procedure as we were until end 2015. We had to (EG) get permission from the German Parliament to pay off the IMF early, the German Parliament can fuck off from now on as our business is none of theirs any more.
Now we can make sovereign unilateral decisions again and present them to Eurogroup to be ‘noted’ after the fact. Noonan is the most senior minister in Eurogroup until he retires as FinMin (likely when Enda goes in late 2017 or so) and can basically do what he wants for the next 2 years. Nobody will pick an argument with him over it whether they agree or not, more important things to be doing.
They are loan CONTRACTS with UK/Sweden/Denmark the terms of which specify that they cannot be paid off unilaterally and/or without the others being paid off too.
There are people very well paid to look at such matters and if it could have happened by now I suspect it would have.
Our interest rate with Sweden and Denmark is very low but the Swedes could do with the money now as could the UK. I suppose we would have to clear off an equivalance of EFSM loans as well so the cost of clearing all bilaterals in full plus an EFSM equivalance is around €10bn or €11bn but all replaced with cheaper funds on the open market. This is very doable in 2016/7 for us. We might as well get a streamlined early repayment protocol in place with the EU as well seeing as all remaining non sovereign/bilateral loans are multilateral EFSM or EFSF ones.
We were due to pay off a quarter of the €22bn EFSM loan either last month or this month anyway…another €5-6bn would halve the EFSM loan.
The EFSF loan which is the other large facility is low interest and very long term and should be tackled last. It wont save us any interest.
Note we are also in extended IMF monitoring until 2021 as part of the 2010 bailout so we cannot ‘get rid of’ the IMF as such, not that they are bothering us any or likely to impede early redemptions.
Makes total sense 2pack. We’re benefitting from unnaturally low credit prices since it’s priced on the basis that the ECB is underwriting our bonds. Might as well take full advantage of it while it lasts.
The only prediction I am making here is that we can issue €15bn in each of 2016 and 2017 in a benign environment for us. Once oil bounces back in 2017, and I fear it will bounce back hard, all bets are off thereafter.
Increase the 2 bars on the left to c.€15bn in each year and get 2019 and 2020 to under €15bn in each year as well. This is doable while we are growing fast and we will continue to grow fast in 2016 and probably 2017 (relative to the EU anyway)
After 2017 we are in uncharted territory with a new FinMin who is low in the Eurogroup pecking order and a less benign environment with Eurozone QE surely on a taper by then. Not the time to get caught with large annual funding requirements to my mind.
They got a waiver for the IMF prepayment. Didn’t look for the bilateral credit agreements but this notice to the Swedish parliament corroborates your point.
If you are going to pay off the bilaterals in full you don’t really need permission from the Swedes, just write them a cheque for their end and they sort of need the money right now.
You need to inform Eurogroup and the IMF who are hardly going to object either…the IMF least of all seeing as we owe them hardly anything now.
Anyway all of this will wait until early Q3 2016 when the election is over and Noonan likely reappointed as MoF. By then the NTMA will be fully funded for both 2016 and 2017 anyway and may as well keep borrowing like mad if the rates are as low as this weeks.
Now that Draghi has signalled another swampings of ECB funds …requiring of collateral…it is time to increase debt issuance in 2016 to €20bn and swap out that expensive bilateral and sovereign 5%+ interest rate hump from 2019 and 2020 with something a hell of a lot cheaper to service…timelines including 7 10 12 15 20 and 30 years seem ideal. Get papering.
€6-10bn planned is deeply unambitious…foolhardy even. Get issuing like mad. .
The yield on the 10 year sold only last month dropped as low as 0.96% yesterday. Lets hope this weeks auction is a proper biggie like a 7 year €5bn issue at 1.01% coupon! With German interest rates heading negative there is a huge appetite for government debt right now and we have a huge amount to manage interest rate wise.
We might be heading into a period of unstable government propped up by a rabble of populist independents for the rest of this year, strike now…and fast. Anything less then €5bn in the next auction would be daft!
Yield under 1% on the new benchmark 10 year bond issued today.
Ireland Sells €1,000 million of its 10-Year bond by auction
11 February 2016 – The National Treasury Management Agency (NTMA) has today completed an auction of €1,000 million of the benchmark 10-year Irish Government bond, 1% Treasury Bond 2026, at a yield of 0.999%.
Total bids received amounted to €1,812 million which was 1.8 times the amount on offer.
Maturity Amount Yield Cover
15 May 2026 €1,000m 0.999% 1.8 times
With the completion of today’s auction the NTMA has raised €4 billion from its stated target range of €6-10 billion in the bond markets this year.
Considering how bond yields became such a popular metric for economic health here and in the uk media between 08 and 2014 you would think FG and Labour would be singing about this from the rooftops. Not all of the electorate are simpletons, but most are time poor.
If you’re going to play that card, it’d be best used in the closing stages IMO, the last hours before the moratorium. It leaves it fresher in the minds of the voting public and gives opponents less time to counter. Much of the reduction is down to the ECB though as we’ve seen with Greece it takes a government with a slight modicum of cop on to understand the benefits of working with the ECB.
Q4 GDP and therefore effective final Debt/GDP Q4 2015 are due for release next week. Around a week before the moratorium. There is normally one more adjustment to ‘last year final’ some time in summer.
I suspect final Debt/GDP will be around 97.5% and which side of that ( 97% or 98% ) will be what is trumpeted loudly per Bumbles theory. We are better than Spain already and will pass France out in mid 2016 and the UK some time in late 2017 from the look of it.
I don’t think it’s inconceivable that GDP growth might have gone negative in Q4. There were a lot of one-off events earlier in the year if the media is to be believed. Either way a GDP announcement during an election campaign should be interesting.
Today ( May 12) Ireland fully covers its required 2017 fundraising with a 6 or 7 year benchmark issue and all our 2016 debt is ALREADY paid bar a measly €13m.
Time now to turn to these bilaterals and smoothing off the payment spike in 2019/2020
**My best guess is that the FULL redemption of the UK Bilateral during their FY ( April 2016 to April 2017) will be announced close to the Brexit referendum. ** No need to tell Brussels anything as they will simply find themselves in ‘agreement’ with Noonan at FinMins after the fact. I would expect the announcement between the 7 and 21 of June…and in London I should think.
ECB purchases of Irish bonds in 2016 is the lowest of any Eurozone member as a % so we need to issue some low coupon paper for the ECB to buy between now and christmas anyway, but not before July. That issue should nicely cover the bilaterals with the deliverable being lower interest rates and carrying cost.
Looking at the profile above perhaps a few €1-1.5bn auctions in the 7-9 year maturity range ( and maybe some €300m 12-15 year benchmarks (which is around where we need a few benchmarks anyway) is precisely what is required in H2 2016.
If total issuance is less than €12bn on the year ( it will hit €6bn today inc T Bills) I shall be most disappointed and if a penny less than €10bn the NTMA should be shot.
The QE programme run by Draghi ends in March 2017 so it could be a crowded Q1 next year. Feed them out this year I say.
Irelands Debt Maturity Profile in Late 2014 follows, you see the 2019/20 spikes are higher and there was less post 2020 maturity back then. It has flattened some in the last year and a half and more flattening across is the order of the day.
Do catch up with the language Skippy!