The National Debt


#481

Public Service pensions are unfunded in the sense that the recipient of the pension treats the pension contributions as cash and spends them. There are lots of ways to look at this liability. I am not sure a 70 year DCF is a particularly good choice but surely a 70 year DCF on the corresponding contribution stream should at the very least be included be included for balance?


#482

A letter to Pascal. from the Central Bank. The National debt was around 63% of GDP at the end of 2018.

She wants a formal target of a debt of no more than 45% of GDP and she wants any ‘windfall’ this year to be used to reduce absolute debt which otherwise looks like being around €205bn at end 2020 after the cash buffers are due to be cleared out.

I totally agree that ending 2020 with a headline debt of LESS than €200bn is a good thing…but will Pascal dig out that poxy HSE yet again??? :frowning:


#483

Here we see a woman seeking to exercise authority over a man in the public space, something that for thousands of years we have known is not a good thing, emphasised repeatedly in the Bible, a repository of human wisdom learned the hard way over hundreds of generations, we no longer need ask why such things might be true, instead we must simply understand that our ancestors learned these things and pass them on to us as a gift, the hard learned wisdom of thousands of years.
We ignore this wisdom at our peril.
Or deny it because THE PATRIARCHY bequeath it to us!


#484

The UK Bilateral is now in the unwinding process. As part of the bailout the UK disbursed around €4.0bn by 2013, on which we paid around €100m a year in interest for a number of years. The bilateral is to be paid off in 8 tranches of €500m or so and we shall pay the third of the 8 at the end of this month with the last tranche due in early 2021.

The collapse in sterling in recent years has reduced both the outstanding value of the bilateral and the interest rate burden which was constant from 2014 to 2016 at €100m a year before reducing some since.

We only have to pay back €3.5bn now as against the €4bn we originally borrowed. And we will only owe around €2bn in a few weeks time. :slight_smile:


#485

Its nice to have some good news now and again!


#486

But in perspective.

In 2020

a) we will retire c.€15bn in sovereign debt on which we pay near 6% interest.
b) near €2bn of UK Bilateral on which we pay near 3%

and we will replace these with 10 year sovereigns (mainly) that we issue at 1 to 1.1%

BUT 2020 is the last year when we will replace large gobs of expensive debt with equally large gobs of much cheaper debt (and with that the annual interest bill lowers significantly) . We gain c.€500m in 2021 from reduced interest…yaaaaay that is the annual HSE overrun covered. :smiley:

IF sovereign rates are still this cheap when we go back into the market in late 2021 we will be swapping more like 3% for 1% paper and the savings are then smaller year to year thereafter, we would save c,€200m a year, averaged, each year from 2022 on to 2027.

On another matter, given the rude GDP growth levels seen in Q1 and Q2 2019, and also assuming the Tories and the DUP don’t blow both their legs off instead of inflicting a flesh wound or 2 in the end, the Debt/GDP ratio is currently very well set to go below 60% in Q4 2020 latest after we pay off a bond of around €9bn in October 2020.

Revised GDP numbers indicate we finished 2018 with a debt/gdp ratio of near 63% Debt to GNI* would then go under 90% in 2020 too.

But that benign view depends entirely on a pair of flatulent toads named Boris and Arlene. :frowning: :frowning:


#487

Here is the schedule (apart from €2bn of UK Bilateral) for the next year. We have to pay off €25bn in a year. Of this the NTMA has around €23bn in hand already

BUT some of that may be required to deal with Brexit. Nobody knows. :frowning: At this moment the expected redemptions are almost fully funded and we need not participate in the bond markets for around a year or more. We basically don’t need to borrow, in other words and can take a holiday by and large or throw out some small shorter maturity issues if we must.

5.9 Treas Bnd 201918/10/2019 €6bn
4.5 Treas Bnd 2020 18/04/2020 €10.6bn
5.0 Treas Bnd 2020 18/10/2020 €6.5bn
0.8 Treas Bnd 2022 15/03/2022 €6.8bn
0.0 Treas Bnd 2022 18/10/2022 €5.1bn
3.9 Treas Bnd 2023 20/03/2023 €7bn
3.4 Treas Bnd 2024 18/03/2024 €8bn
5.4 Treas Bnd 2025 13/03/2025 €11.5bn

Luckily we don’t have to do much in the bond markets for the next 2 years because there is something badly wrong with the bond market this week. It is a good time to be out of it.

We can issue some 2 year, 4 year, 5 year and even 8 year if we must but the market is showing strong signs of pushing back against longer issuances right now.

As if the U.S. Federal Reserve didn’t already have enough on its plate heading into its meeting on interest rates this week, chaos deep inside the plumbing of the U.S. financial system has thrown policymakers an unexpected curveball.

Cash available to banks for their short-term funding needs all but dried up on Monday and Tuesday, and interest rates in U.S. money markets shot up to as high as 10% for some overnight loans, more than four times the Fed’s rate.


#488

Appreciate these updates on the debt, it’s a good thing to be reminded of / keep track of.

We’ve got our own flatulent toads, some of whom could be in government by 2021.


#489

It will always be with us, the only issue is how much it will cost. The overnight Repo situation in the US bodes badly for sovereign bonds in my opinion but we should not be forced to issue at unfavourable rates unlike the Italians, who need to refinance €20bn a month of theirs in a good month and who pay whatever it takes to get the cash in.


#490

Have an Economic Letter from the CB.


#491

It all looks very optimistic to me. Then again the central bank of Ireland was calling the overall picture of the Irish economy positive in 2006. These bluffer economists have ruined the world. We are at the end of the largest credit bubble in history with no clean balance sheet left to bail the world out. Brexit is nothing compared to the collapse of the bond market and the Breton woods system which grows closer by the day.


#492

Sadly I have to agree, major deleveriging and default ahead. It ain’t gonna be pretty, a lot are going to get caught with their pants down and unfortunately I think we will be among them


#493

So. After many years of forecasting an increase in sovereign bond yields the analysts have given up.

As they have finally given up I think we can safely say that bond yields will actually start to rise, and Ireland 10 Year just blipped above 0% yield, marginally so, this morning.

They gotta go a long way up before the NTMA/Exchequer feels pain of any sort. The bulk of our redemptions to be financed out to 2025 are paying quite a lot over 1% interest right now so even if we have to pay 2% interest on a 10 year issue we won’t worry overly.

5.9 Treas Bnd 2019 18/10/2019 €6bn
4.5 Treas Bnd 2020 18/04/2020 €10.6bn
5.0 Treas Bnd 2020 18/10/2020 €6.5bn
0.8 Treas Bnd 2022 15/03/2022 €6.8bn
0.0 Treas Bnd 2022 18/10/2022 €5.1bn
3.9 Treas Bnd 2023 20/03/2023 €7bn
3.4 Treas Bnd 2024 18/03/2024 €8bn
5.4 Treas Bnd 2025 13/03/2025 €11.5bn

The October and April Redemptions, a combined 3% of GDP worth, may bring the official Debt/GDP ratio below 60% for the first time in around 10 years when the Q2 report on exchequer requirements is published next summer. Boris Volente. of course. :frowning:

A sub 60% Debt/GDP ratio is merely a first virtuous number from Irelands point of view. An end of the beginning number if you will.

We need to target 4 simultaneous metrics from now on.

  1. 40% Debt/GDP
  2. 60% Debt/GNI*
  3. An absolute debt of no more than €150bn GROSS

And 4. one of those must end up lower in order that we can meet all three metrics, likely Debt/GDP.

We still have quite a ways to go. :frowning:


#494

Report shows €5.2bn increase in tax and PRSI take

The Comptroller and Auditor General’s annual report shows that tax and PRSI increased by €5.2 billion in 2018 compared to the previous year.
Corporation tax receipts increased by €2.2bn compared to 2017 - reflecting higher levels of corporate profitability in the economy.
Income Tax receipts reported year-on-year growth of €1.2bn
The report shows VAT receipts were up by nearly €1bn and Excise Duties fell by €507 million in 2018.
The report also reveals that Ireland’s gross national debt increased by €6.6bn in 2018 to €205.3bn.

https://www.rte.ie/news/ireland/2019/0930/1079198-comptroller-and-auditor-general/

Even last year with rising tax revenues and rising population/workforce, the national debt increased again, by circa 3%.
So when is it ever going to be a good time to grasp the nettle. We are always going on a diet next week. No matter what money printing chicanery or leprechaun economics GDP figures they care to sell us.


#495

Thats a worrying increase in borrowing alright. I thought that there was a small budget surplus last year so is there any chance that the increase in borrowing was due to lining up cheap money to be used to pay down more expensive loans due to be paid off this year or next?

Also noting that the Eurozone chiefs are going to helicopter in printed money again. This usually ends up in the banks and leads only to rises in asset values. Why don’t the Euro bosses send the money into the governments instead so that they can ease austerity for their citizens and try to kickstart the ailing Euro economy in that way, which would seem a much better plan for the average citizen?


#496

That first column isn’t the interest rate, is it? If so, are we going to save a ton of money over the next few years by rolling it over more cheaply?


#497

We have saved most of that “ton” as we already paid off the bulk of our ~5% paper in past years, will pay off most of the rest by April 2020 and only have one block left, in 2025.The rest of our debt is generally a lot cheaper.

The National debt will fall 2% this month, over 3% in April alone and a further 2% in October 2020. As well as that the redemptions are so low in 2021 that end 2020 will be the first time the NTMA can end a year with less than €10bn cash at hand for ‘next years debt payments’. Therefore the end 2020 Debt/GDP ratio looks like being around 55% …but nobody knows what will happen with Brexit and the Brits have clearly, collectively, now gone quite mad and look like committing some form of collective seppuku right now. :frowning:

Focus on end 2020 not on the now,

Much of the money to pay off that 2020 debt is already forward borrowed at 1% but we don’t get the savings until after we pay off the 5% paper. The NTMA can even stay clean out of the debt market until 2020 while the Brexit palaver settles down, it has around enough cash at hand to make all the redemptions till then and finance a deficit if one happens.

In 2020 the interest bill on the total debt will be in the order of €4.7bn but that was near €8bn in 2013, that is the only tangible gain to date as our overall debt has been pegged around €200bn for over 5 years now.

Even if the Brits commit seppuku the debt/gdp ratio will end up below 60% at end 2020 I predict, but the pace of improvement in that ratio will drop hugely from then on, if they belatedly decide they like their own bowels things should be better and the debt/gdp ratio will approach 50% by late 2022 or so.


#498

Comptroller and Auditor General has released a detailed chapter on NTMA


#499

This was a big chunk of it


#500

Report is here