Lefournier3 wrote:
In the excitement, the ECB will quietly end QE on Thursday but it will keep ZIRP for another year at least. Even so, governments have to be concerned about their refinancing costs next year when their best customer has walked away. QE has been great for our NTMA. Debt servicing costs for 2018 are under €6 billion, that's €4 billion less than the NTMA had been predicting for 2018 before QE kicked in. But Brexit risks are already weighing on us. The NTMA was very reticent about the yields on the 750 Million of 5- and 10-years bonds it sold last month and we have to refinance about €14.6 billion of maturing bonds next year.
This is largely covered in the National Debt thread but let me restate.
1.
Most of 2019 is already refinanced, if not all, not least because the NTMA has ended 2019 with more cash at hand than planned even in June of 2018. The issuance in the next 15 months is to cover a large maturing rump in 2020. 2021 is almost clear, there is almost no debt to repay that year, and 'heavy' issuance terminates in March 2020 and will not resume until well into 2021 but at a notably lower level than recent years (barring a cyclical recession).
2. Debt servicing costs will fall to €5bn in 2021, they will bottom out there but do remember that we paid €2.9bn per annum to service
a much much smaller debt around 20-25 years back and that servicing as a % of government income is insignificant compared to the late 1980s for example. Next years debt servicing will be nearish €6bn and in 2020 we are looking at € 5.5bn ish.
3. At the end of primary ZIRP/QE this month the ECB will have sloshed €2tr into Sovereigns and €0.5tr was sloshed into Corporates. They are not reducing this pile in 2019 or 2020 but will tactically reallocate maturing portions of the overall €2.5tr into whatever they consider necessary. Targeting a limited set of bonds can work wonders by virtue of coupling, EG Irish sovereigns are coupled with the bund, not with new lirazone issues. I don't think the overall pool of €2.5tr will shrink until after we have had one of them there recessions first and it will take many years to unwind (reduce) even part of it.
When formal ZIRP ends (dunno really but not for a year) the big risk is that some corporate bonds rise faster than sovereigns do and that the spread widens there. This would be most unfortunate in a recession.
As for sovereigns the Gilets mallarkey in France means that Macron no longer has a mandate to get their national debt under control and that was what the entire Macron project was about. If France waddles past the 100% mark we are in deep shite all over Europe IMO.

We can do almost nothing about Brexit, the Brits are politically fragmenting like they did over Irish Home Rule at the turn of the last century and that is an internal matter with external consequences to be honest.

4. The NTMA are quiet because their biggest annual issuance is a syndicated jobbie in January and they will want to offload
at least €5bn and perhaps even up to €7bn of (likely) 8 and 10 year paper and at a benchmark rate in only 3 weeks time. I believe it will go rather well myself, enough said for now cos we will know soon.
