NTMA Q1 Performance and Future Debt

Économiste Monétaire

The NTMA has released a Q1 performance summary. In the report there contains some projections on future debt ratios and debt considering a €50bn bond issuance to fund the National Asset Management Agency (NAMA). Some select points from the document:

Debt Ratios|2009|2010|2011|2012|2013
Based on April 2009 Budget Deficit Projections|||||
GGD/GDP|59%|73%|78%|79%|77%
GGD/GDP Net of cash balances|47%|61%|69%|72%|73%
Based on April 2009 Budget, assuming a €50billion bond issuance for NAMA|||||
GGD/GDP|88%|103%|107%|106%|103%
GGD/GDP Net of cash balances|77%|91%|97%|99%|99%

• There will be Exchequer Borrowing Requirements of ~€20bn. This includes €3bn for the NPRF.
• "The purchase of property assets by the proposed National Asset Management Agency is expected to be paid for by the issue of Irish government bonds directly to the banks." That confirms what the budget documents glossed over.

Results of the bond auctions so far this year, the amounts totalled €11.3bn:

• 8 January (syndication – new bond):
  4% Treasury Bond 2014 – raised €6 billion at a yield of 4.069%
• 25 February (syndication – new bond):
  3.9% Treasury Bond 2012 – raised €4 billion at a yield of 4.01%
• 24 March (auction – existing bonds):
  4% Treasury Bond 2011 – raised €400 million at a yield of 3.459%
  4½% Treasury Bond 2020 – raised €900 million at a yield of 5.808%

Results of the recently introduced Irish Treasury Bill programme, which aims to exploit our short-term debt rating and demand for short-term debt in the current deflationary and risk averse environment:

• March 26th, 2009 reults:
  1 month bills - €500 million at an annual yield of 1.139%
  3 month bills - €500 million at an annual yield of 1.286%
  6 month bills - €500 million at an annual yield of 1.384%
  Bids totalled €3.7 billion.
• April 8th, 2009 results:
  1 month bills - €500 million at an annual yield of 0.967%
  3 month bills - €500 million at an annual yield of 1.058%
  6 month bills - €500 million at an annual yield of 1.157%
  Bids totalled €4.4 billion.

The amount of cash the NTMA keeps for the government accounts as a liquidity buffer stands at €27bn. This is up from €20bn in cash balances at the end of '08.

Debt to GDP levels as projected by the European Commission from January 2009, with the Irish figures corrected from the April budget:
Country |2008 (%)|2009 (%)|2010 (%)
Belgium|88.3|91.2|94.0
France|67.1|72.4|76.0
Germany|65.6|69.6|72.3
Ireland|41.0|59.0|73.0
Italy|105.7|109.3|110.3
Portugal|64.6|68.2|71.7
Spain|39.8|46.9|53.0
UK|50.1|62.6|71.0
Euro Area|68.7|72.7|75.8

There's no mention of additional debt in nominal amounts in the document. If you take the figures from Table 2 in the 'Macroeconomic and Fiscal Framework' budget document, as the projections for nominal GDP, you get nominal borrowings of:

• 2009: €101.185bn (stock of debt at the end of the year)
• 2010: €121.983bn (stock), change of €20.798bn
• 2011: €136.344bn (stock), change of €14.361bn
• 2012: €147.407bn (stock), change of €11.063bn
• 2013: €150.959bn (stock), change of €3.552bn

If one were to include the hypothetical amount for the NAMA program we get: 2009: €150.920bn; 2010: €172.113; 2011: €187.036; 2012: €196.445bn; 2013: €201.932. To put that in perspective graphically (Debt to GDP measured on the right vertical axis):

silverharp

what is the latest on GDP? v GNP? or the extent that GDP maybe overstated versus our neighbours?

Has anyone speculated what the premium in basis points of additional interest would be as we creep up the curve?

Économiste Monétaire

silverharp wrote: »

what is the latest on GDP? v GNP? or the extent that GDP maybe overstated versus our neighbours?

Has anyone speculated what the premium in basis points of additional interest would be as we creep up the curve?

GDP is estimated to be €183.716bn for 2008 and GNP at €153.890bn. Those will change when they revise different quarterly figures. Relative to our neighbours: you could probably check that on Eurostat. It might be a good idea to wait for the revised national income figures for '08 from all countries. I forgot to link the document (duh) but it's here. Check page 7, they expect interest payments to increase "substantially." There's not much on premium over other benchmark bonds, except that the Irish debt/Bund spread is falling. Interest payments are forecast to rise to 18.7% of tax revenue in 2013; it was 3.8% in 2008.

johnnyskeleton

Do those figures take into account the projected drops in GDP during that period?

Also, it seems to suggest that either GDP will increase between 2012 and 2013 or else total government debt will decrease during that period. My understanding was that even in the best of all possible worlds (i.e. Brian Lenihan's projections) there would still be a government deficit in 2012 and 2013.

Even still, that's bad, and it only looks at a €50bn NAMA issue.

Économiste Monétaire

johnnyskeleton wrote: »

Do those figures take into account the projected drops in GDP during that period?

Also, it seems to suggest that either GDP will increase between 2012 and 2013 or else total government debt will decrease during that period. My understanding was that even in the best of all possible worlds (i.e. Brian Lenihan's projections) there would still be a government deficit in 2012 and 2013.

Even still, that's bad, and it only looks at a €50bn NAMA issue.

Yeah, the GDP figures are from the DoF. They're expecting GDP growth to be 2.7% in 2011, 4.2% in 2012, and 4.0% in 2013 (-7.7% in 2009 and -2.7% in 2010). They seem a bit out there to me (on the weird scale), but it's the only figures they give. The General Government balance is forecast to be negative all the way through to 2013 (and beyond I guess). It's in the 'Macroeconomic and Fiscal Framework 2009-2013' document from the budget.

johnnyskeleton

Économiste Monétaire wrote: »

Yeah, the GDP figures are from the DoF. They're expecting GDP growth to be 2.7% in 2011, 4.2% in 2012, and 4.0% in 2013 (-7.7% in 2009 and -2.7% in 2010). They seem a bit out there to me (on the weird scale), but it's the only figures they give. The General Government balance is forecast to be negative all the way through to 2013 (and beyond I guess). It's in the 'Macroeconomic and Fiscal Framework 2009-2013' document from the budget.

Those are some crazy GDP projections. When Q109 stats come out, this will be exposed for the wishful thinking that it is.

nesf

Économiste Monétaire wrote: »

Yeah, the GDP figures are from the DoF. They're expecting GDP growth to be 2.7% in 2011, 4.2% in 2012, and 4.0% in 2013 (-7.7% in 2009 and -2.7% in 2010).

From -7.7% to 4.2% in three years. Optimistic isn't the word.

Économiste Monétaire

johnnyskeleton wrote: »

Those are some crazy GDP projections. When Q109 stats come out, this will be exposed for the wishful thinking that it is.

It's projecting a pretty sharp V shaped recovery. Some people find this dubious, instead, believing there will be an L shaped, Japan style, moderation.

nesf wrote: »

From -7.7% to 4.2% in three years. Optimistic isn't the word.

For real. If the majority of the collapse was concentrated in exports (tied to a downturn in our trading partners) then it would be slightly more believable. Philip Lane has a note in this.

johnnyskeleton

Économiste Monétaire wrote: »

It's projecting a pretty sharp V shaped recovery. Some people find this dubious, instead, believing there will be an L shaped, Japan style, moderation.

More importantly, since we only showed a significant decline in GDP in Q408 while the economy has been gradually sinking over the last 2 years or so, if there is going to be a V shaped decline and recovery, we are still at the top of the left arm of that V.

It seems to me that a V shaped recovery is only likely if we have a plan for recovery. We don't. Our government is just assuming that when the rest of the world recovers we will magically rise with the tide.

Économiste Monétaire wrote: »

For real. If the majority of the collapse was concentrated in exports (tied to a downturn in our trading partners) then it would be slightly more believable. Philip Lane has a note in this.

Indeed. I doubt we are even close to the end of the collapse in housing, construction, manufacturing and retail. I also understand that there is a some time lag between an event and when it shows up on the statistics. So the declines in Q408 were caused by the declines in Q2 & Q3 08, and it is possible we will see the late Q3 and Q4 08 declines appear in Q109. If so, GDP could decline by the whole year's projection in Q1.

eamonnm79

Do these figures take the Dell factor into account?
The PCs made in limerick for all of europe were 5% of our exports and 2% of our GDP. Thats All going to be done in Poland now.

nesf

eamonnm79 wrote: »

Do these figures take the Dell factor into account?

One would hope so.

142857

johnnyskeleton wrote: »

Indeed. I doubt we are even close to the end of the collapse in housing, construction, manufacturing and retail. I also understand that there is a some time lag between an event and when it shows up on the statistics. So the declines in Q408 were caused by the declines in Q2 & Q3 08, and it is possible we will see the late Q3 and Q4 08 declines appear in Q109. If so, GDP could decline by the whole year's projection in Q1.

When do we get the first numbers in for Q1?

eamonnm79

Économiste Monétaire wrote: »

GDP is estimated to be €183.716bn for 2008 and GNP at €153.890bn. Those will change when they revise different quarterly figures. Relative to our neighbours: you could probably check that on Eurostat. It might be a good idea to wait for the revised national income figures for '08 from all countries. I forgot to link the document (duh) but it's here. Check page 7, they expect interest payments to increase "substantially." There's not much on premium over other benchmark bonds, except that the Irish debt/Bund spread is falling. Interest payments are forecast to rise to 18.7% of tax revenue in 2013; it was 3.8% in 2008.

Great we are back to the bad old days of having to spend nearly 1/5 of the tax take on Interest payments(and these are optimistic government figures).
This means our expenditure has to get to 80% of our tax intake before we will even start making inroad into a national debt that is going to be huge.

We cannot afford this Borrowing for NAMA. We need to nationalise the banks, cut banking jobs radically (just think hw much of our tax money is going to pay Anglo workers right now)
Lend to proper businesses with good business plans only.

I dont agree with going after the personal assets of Company directors.
But businesses who opened multiple companys and try to put all the losses in one company and hide assets in others should be persued.


I think we need to introduce proper Bankrupcy legistlation.

Basicly we need to start over.

But lets try to minimise the depth of our starting point.
I think that if any party leader said they were going to charge european tax rates and give American standard services until we recover but then when we all work together and get an up turn, taxes will not come down. However services will improve.

The boston V berlin arguement has been lost by the unraveling of the very worst of bostenism. Ich ben ein Berliner!