State raises €2.5 billion in bond auction

Scofflaw

The NTMA has raised €2.5bn in 5-year bonds. Originally, the bond issue was going to be €2bn at a rate of 3.45%, but excess demand enabled the NTMA to raise €2.5bn at 3.35%.

The agency had hoped to sell around €2 billion, a source close to the deal said, but netted more after orders topped €7 billion.

The strong demand also allowed the NTMA to tighten the deal's pricing, trimming the yield to around 3.35% from 3.45% indicated at its launch, bankers said.

The deal saw some investors return to the Irish debt market after a two and a half year break, another trader said.

http://www.rte.ie/news/2013/0108/ntma-bond-auction-business.html

Meanwhile, the ESM has also raised money today, short-term and at negative rates, which means there's still plenty of demand for safe havens out there:

The ESM held its first debt auction today, selling 1.9 billion euros ($2.5 billion) of three-month bills at an average yield of minus 0.0324 percent. Investors placed bids for 6.2 billion euros of the securities, the Bundesbank said.

Japan is planning to buy ESM and European sovereign debt in a bid to weaken the yen:

Japan plans to use its foreign- exchange reserves to buy bonds issued by the European Stability Mechanism and euro-area sovereigns, as the nation seeks to weaken its currency, Finance Minister Taro Aso said.

“The financial stability of Europe will help the stability of foreign-exchange rates, including the yen,” Aso told reporters today at a briefing in Tokyo. “From this perspective, Japan plans to buy ESM bonds,” he said. The purchase amount is undecided, Aso said.

http://www.bloomberg.com/news/2013-01-08/japan-to-buy-esm-bonds-using-forex-reserves-to-help-weaken-yen.html

And Barroso claims the 'existential threat' to the euro is over:

"I think we can say that the existential threat against the euro has essentially been overcome," he told a conference in his native Portugal on Monday. "In 2013 the question won't be if the euro will, or will not implode."

His view was rejected by market watchers who said the eurozone debt crisis was far from over.

Neil Mellor, a currency expert at Bank of New York Mellon, said: "2013 will be a tougher year than 2012 for Germany and by extension, the euro area as a whole."

HSBC in its review of 2013 said the troubled region has stepped back from the brink of break-up - "at least for now".

http://www.telegraph.co.uk/finance/financialcrisis/9787018/Threat-to-the-euro-is-over-claims-EU-chief-Barroso.html

I would say he's right about the existential threat, and that "market watchers" are also right that the crisis isn't over, which, contrary to the journalistic prose, aren't really contradictory views.

cordially,
Scofflaw

Chips Lovell

Lower than the 3.5 per cent we're borrowing at from the Troika too.

Scofflaw

Vladimir Kurtains wrote: »

Lower than the 3.5 per cent we're borrowing at from the Troika too.

It's a terrible business this can-kicking...

cordially,
Scofflaw

antoobrien

Vladimir Kurtains wrote: »

Lower than the 3.5 per cent we're borrowing at from the Troika too.

Which is probably where at least some of this money will be used as the Troika loans start coming due in 2015.

Scofflaw

antoobrien wrote: »

Which is probably where at least some of this money will be used as the Troika loans start coming due in 2015.

As per:

Lender |Nominal Loan Amount1 |Date of Draw Down |Maturity Date |Term from Date of Drawdown |Interest Rate
European Financial Stabilisation Mechanism (EFSM) |€5.00 billion |12-Jan-11 |04-Dec-15 |4.9 yrs |2.50%
|€3.40 billion |24-Mar-11 |04-Apr-18 |7 yrs |3.25%
|€3.00 billion |31-May-11 |04-Jun-21 |10 yrs |3.50%
|€2.00 billion |29-Sep-11 |04-Sep-26 |14.9 yrs |3.00%
|€0.50 billion |06-Oct-11 |04-Oct-18 |7yrs |2.38%
|€1.50 billion |16-Jan-12 |04-Apr-42 |30.2yrs |3.75%
|€3.00 billion |05-Mar-12 |04-Apr-32 |20.1yrs |3.38%
EFSM Total |€18.40 billion |||11.8yrs weighted average life |
|||||
European Financial Stability Facility (EFSF) |€4.19 billion2 |01-Feb-11 |18-Jul-16 |5.5 yrs |2.75%
|€3.00 billion |14-Nov-11 |04-Feb-22 |10.2yrs |3.60%
|€1.27 billion |12-Jan-12 |04-Feb-15 |3.1yrs |1.73%3
|€0.48 billion |19-Jan-12 |19-Jul-12 |0.5yrs |0.37%3
|€1.00 billion |15-Mar-12 |23-Aug-12 |0.4yrs |0.29%3
|€2.80 billion |03-Apr-12 |03-Apr-37 |25yrs |Floating Rate4
EFSF Total |€12.74 billion |||10.1yr weighted average life |
United Kingdom Bilateral Loan5 |€0.50 billion |14-Oct-11 |14-Apr-19 |7.5yrs |4.72%
|€0.50 billion |30-Jan-12 |30-Jul-19 |7.5yrs |4.29%
|€0.50 billion |28-Mar-12 |28-Sep-19 |7.5yrs |4.44%
UK Total |€1.50 billion |||7.5yrs weighted average life |
Sweden Bilateral loan6 |€0.15 billion |15-Jun-12 |15-Dec-19 |7.5yrs |Floating 3 mths Euribor +1%
Sweden Total |€0.15 billion |||7.5yrs weighted average life |
Denmark Bilateral Loan6 |€0.10 billion |30-Mar-12 |30-Sep-19 |7.5yrs |Floating 3 mths Euribor +1%
Denmark Total |€0.10 billion |||7.5yrs weighted average life |
|||||
International Monetary Fund7 |€6.040 billion |18-Jan-11 |Amortising: 18 Jul 2015-18 Jan 2021 |
|€1.699 billion |18-May-11 |Amortising: 18 Nov 2015-18 May 2021 |4.5 -10 yrs |Floating Rate
|€1.589 billion |07-Sep-11 |Amortising: 07 Mar 2016-07 Sep 2021 |
|€3.987 billion |16-Dec-11 |Amortising: 16 Jun 2016-16 Dec 2021 |
|€3.357 billion |29-Feb-12 |Amortising: 31 Aug 2016-28 Feb 2022 |
|€1.435 billion |15-Jun-12 |Amortising: 15 Dec 2016-15 Jun 2022 |
IMF Total |€18.11 billion |||4.5 — 10yrs |
Overall Total |€51.0 billion2 |||9.7yrs weighted average life

cordially,
Scofflaw

Anyone

The over subscription is impressive. Surely this shows we can raise funds now independent of the Troika?

jd

Scofflaw wrote: »

Japan is planning to buy ESM and European sovereign debt in a bid to weaken the euro:



http://www.bloomberg.com/news/2013-01-08/japan-to-buy-esm-bonds-using-forex-reserves-to-help-weaken-yen.html

Surely that would strengthen the euro?

View

Vladimir Kurtains wrote: »

Lower than the 3.5 per cent we're borrowing at from the Troika too.

The interest rate charged on a loan usually (but not always) depends on the term of the loan. A longer loan is usually more expensive as there is more time during which a debtor could potentially default on the loan.

If you look at Scofflaw's table, you'll see that the 4.9 year loan from the EFSM has a rate of 2.5% attached to it and the 5.5 year loan from the EFSF has a rate of 2.75%, so funding from both these EU sources continues to be at cheaper rates then the 3.35% rate that the NTMA got from the market today.

But, of course, the EU loaning us money at cheaper rates than the market won't stop the current mantra of "the EU are doing us over", you can be sure.

bhamsteve

jd wrote: »

Surely that would strengthen the euro?

Japan is trying to strengthen the Euro. They often invest large amounts of money in de-valuing the Yen for the benefit of their exports.

NIMAN

Might be a stupid question, but how can Japan do this? Has it not been in recession for many many years?

antoobrien

NIMAN wrote: »

Might be a stupid question, but how can Japan do this? Has it not been in recession for many many years?

In general strong currencies mean expensive exports. By trying to weaken the yen vs € they are trying to make their exports cheaper in Europe.

Scofflaw

NIMAN wrote: »

Might be a stupid question, but how can Japan do this? Has it not been in recession for many many years?

Sure, but that doesn't mean they don't have money.

cordially,
Scofflaw

jd

bhamsteve wrote: »

Japan is trying to strengthen the Euro. They often invest large amounts of money in de-valuing the Yen for the benefit of their exports.

Yes, I know. Scoffkaw said

Japan is planning to buy ESM and European sovereign debt in a bid to weaken the euro:

Chips Lovell

View wrote: »

The interest rate charged on a loan usually (but not always) depends on the term of the loan. A longer loan is usually more expensive as there is more time during which a debtor could potentially default on the loan.

If you look at Scofflaw's table, you'll see that the 4.9 year loan from the EFSM has a rate of 2.5% attached to it and the 5.5 year loan from the EFSF has a rate of 2.75%, so funding from both these EU sources continues to be at cheaper rates then the 3.35% rate that the NTMA got from the market today.

Good point. It had been mentioned in the Irish Times today and I mindlessly repeated it without giving it much thought.

CruelCoin

Scofflaw wrote: »

Japan is planning to buy ESM and European sovereign debt in a bid to weaken the euro:
http://www.bloomberg.com/news/2013-01-08/japan-to-buy-esm-bonds-using-forex-reserves-to-help-weaken-yen.html

They are planning to weaken the Yen, not the euro.

Its in the link name......

Japan is in the economic ****ter for how long now? We'd do the same if able.

Scofflaw

CruelCoin wrote: »

They are planning to weaken the Yen, not the euro.

Its in the link name......

Japan is in the economic ****ter for how long now? We'd do the same if able.

Ta, sorry - typo!

blushing,
Scofflaw

carpejugulum

CruelCoin wrote: »

Japan is in the economic ****ter.

90% of the world would love to be in that kind of economic ****ter.

liammur

carpejugulum wrote: »

90% of the world would love to be in that kind of economic ****ter.

I'm not sure, they have very little growth and huge debt. Bit like the U.S. They are on a knife edge.

I think we will see interest rates spike up soon across the board, can't believe how low they are at the moment, with the central banks just inflating their debts away. This bond bubble hasn't long left.

srsly78

liammur wrote: »

I'm not sure, they have very little growth and huge debt. Bit like the U.S. They are on a knife edge.

I think we will see interest rates spike up soon across the board, can't believe how low they are at the moment, with the central banks just inflating their debts away. This bond bubble hasn't long left.

No, Japan is the really odd exception. It has a very patriotic population that buys their own bonds at low interest rates. Other countries with similar statistics pay a lot higher interest. Would you buy Irish bonds at low interest rates? Hell no, and neither would I.

Well, the patriotism thing is one theoretical explanation anyway - but they definitely get away with having a higher debt than other countries. Here is one article on the topic: http://www.csmonitor.com/Business/Stefan-Karlsson/2011/0721/Why-do-Japanese-bonds-have-such-low-yields

But sure their economy isn't in a very good state, they just get away with it more than other countries.

liammur

srsly78 wrote: »

No, Japan is the really odd exception. It has a very patriotic population that buys their own bonds at low interest rates. Other countries with similar statistics pay a lot higher interest. Would you buy Irish bonds at low interest rates? Hell no, and neither would I.

Well, the patriotism thing is one theoretical explanation anyway - but they definitely get away with having a higher debt than other countries. Here is one article on the topic: http://www.csmonitor.com/Business/Stefan-Karlsson/2011/0721/Why-do-Japanese-bonds-have-such-low-yields

But sure their economy isn't in a very good state, they just get away with it more than other countries.

You are right up to a point, but if the stated aim is to significantly weaken the yen, and inflation, the Japs will also demand a higher rate.

srsly78

That post was talking about Japanese bonds, not European bonds.

liammur

srsly78 wrote: »

That post was talking about Japanese bonds, not European bonds.

All bonds. Patriotic and all as the Japanese are, they won't buy bonds for the fun of it.
All the central banks are printing like crazy, this will lead to inflation, higher rates and big trouble.

Cookie_Monster

So rather than up the subscription and borrow yet more money why did they not re-offer with a lower interest rate so we have to pay back less in the long term and find out the exact level of demand available?

carpejugulum

liammur wrote: »

I'm not sure, they have very little growth and huge debt. Bit like the U.S. They are on a knife edge.

I think we will see interest rates spike up soon across the board, can't believe how low they are at the moment, with the central banks just inflating their debts away. This bond bubble hasn't long left.

...debt mostly owned by the Japanese.

AlmightyCushion

Quick question on bond rates. Are the rates the AER or the total interest owed at the end of the term?

carpejugulum

AlmightyCushion wrote: »

Quick question on bond rates. Are the rates the AER or the total interest owed at the end of the term?

annual rate .. we ain't Germany

djpbarry

liammur wrote: »

I'm not sure, they have very little growth and huge debt.

Not to mention an aging population.