NTMA MAY SKIP NEXT BOND AUCTION - Anyone who watched last night's Prime Time programme would have heard the chief executive of the National Treasury Management Agency, John Corrigan, state that the agency may skip next month's bond auction because the premium being charged on Irish Government debt is too high. This is as a result of pressures on the euro zone arising from the crisis in Greece.
The NTMA holds a monthly bond auction to raise money to finance the budget deficit - bridge the gap between spending and revenue. The key is how much interest a country is willing to pay.
The NTMA's director of funding and debt management, Oliver Whelan, said the agency would prefer if markets returned to a 'more normal' level, and would not be happy with current bond yields on the market.
Mr Whelan said the NTMA would have been looking to raise €1 billion to €1.5 billion next month. He said Ireland would be forced to pay an interest rate, or coupon, of around 5.25% at current rates, while the usual rate would be around 4.5% or 4.75%.
Mr Whelan said the NTMA had completed around 60% of its programme for 2010, so it had a financial cushion to skip a bond auction if necessary.
The National Solidarity Bond, which was launched yesterday, allows Irish investors to put money long-term into savings. The Government will then use that money for spending.
Mr Whelan said the product was very simple, with no fees, charges or commissions. He also said the money could be withdrawn at any time.
Irish Independent personal finance editor Charlie Weston said the attraction of the new bond was certainty, with the money guaranteed. He said the return worked out at around 4% a year, if the money were left in for the full 10 years.
Mr Weston said the length of time was the only downside, as less than 4% of money held by households on deposit at the moment was in accounts for two years or more, and people wanted to remain financially 'nimble' at the moment.
