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IRELAND HAS BOUGHT back €500 million of its own national debt, erasing the need to repay it when it fell due next month.
The NTMA this afternoon said it was cancelling €500 million of a treasury bond which was supposed to be repaid on April 18.
The agency had been due to repay €5.125 billion next month, having raised the money in an auction in January 2012.
Because the NTMA has now bought some of the bonds itself, however, it would only end up repaying the money to itself – meaning it cuts down on administrative costs to simply cancel the bonds entirely.
The agency had already announced a similar move in late December, after buying another €500 million tranche.
The moves are likely to have been part-funded by the issue of new 10-year bonds worth €5 billion last week, and help to ease a ‘funding cliff’ where Ireland was due to make significant repayments of its national debt over the coming 12 months.
Last week’s auction ensured that Ireland had enough cash in hand to make nearly €12.9 billion in scheduled repayments, between the activities next month and in January 2014.
Those repayments will also include a €22 million repayment on its bailout loans, the first time that Ireland will have repaid some of the €56.5 billion it has borrowed so far from the EU, IMF, Britain, Denmark and Sweden.
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Sounds like a good move. I think
I still haven’t a clue. Sounds like they just keep moving 100′s of millions around the place :(
what were the figures involved in terms of savings or actual costs and who were the holders of the bonds ? ; Goldman Sachs? Politicians? Bankers ?- Without clarity it stinks of cover-up !
Bonds often trade below par in the secondary market. Obviously I don’t know what price they paid for them but can only assume they were purchased at a discount thus resulting in a saving, wouldn’t make sense to buy them otherwise
Because everyrhing this country has done in the past few years has made total sense !
To be fair, I can’t think of anything the NTMA has done which hasn’t made sense. They’ve done a fine job in difficult circumstances.
Joseph it makes sense because it saves money. Simple mathematics not history.
What was the sellers fee?
Jason
The answer is zero and you are merely showing complete ignorance by asking.
And people just remember. Its not our debt no matter how much they tell you it is.
Banking debt that was turned into sovereign debt by this fine gael/labour government.
Gosh, Peter. Ignorant of the funds market. Can you imagine that. Jason, you should be ashamed-
Around 70% of it is our debt even if you exclude the debts associated with the banks.
@Leonard I think you’ll find it was the previous government who transferred bank debt to sovereign debt. Credit where it’s due and all!
Jason, theres no transaction fees on bonds.
Peter, your an a*s. not everyone works in finance.
Gee Jason, how ignorant of you! Next you you be asking how the large hadron collider works.
Chris, would you be kind enough to break down that 70% for me and reference your source please.
56.5 billion minus 22 million is ehhh…..like trying to pay the mortgage with coppers!
Every little million helps. Look after the millions and the billions will take care of themselves (maybe). ;-)
Completely confused !! We sold,they bought ,we bought,we re sold … …
We borrow money (sell a bond/ debt) at a discount to what we will repay. So for example, we sell a bond for 900,000 but will repay 1 million when it matures. the value of this bond gradually increases to the 1 million nominal value over the lifetime of the bond (1 year, 10 years, whatever). Effectively the difference is interest earned by the lender over the period. If we buy back early, (assume only half the time period has elapsed) then we buy back the debt for 950,000. We’ve saved 50,000 because we don’t have to repay the full 1 million debt at the final maturity date. It’s definitely a smart move.
Well explained Amy, thanks
Jason, it is not a scam. Please do not show your ignorance of how to save public money. You are commenting on something about which you obviously know nothing. That is unwise.
What about interest rates ?
Or do we just ignore it.
@ Rory. Wasting your time Ro!
Just so people know the bond market is tricky. for example you sell a bond for 100 and agree to repay them with an interest rate of 3%. So the total you pay per bond is 103. Bonds then trade on a market like the stock exchange and the value can decrease or increase. If you buy the bond back at 95 euro you make a profit of 8 as you save the interest of 3 and the 5 you would have paid back in the bond. Therefore if you extrapolate out over 500m you could possibly make a lot of money or save money as I am sure the ntma did.
Who is making money on the fees ?
They must be a reason, but I don’t get why we issues bonds no later than this month, and are now using the money to buy back older ones. Could we not just have kept the old ones? Did we get better interest rate on the new ones?
Ah I see the problem you are having. When you try to apply logic to financial scams, it gets a little confusing.
You couldn’t keep the old ones because they mature in April and we’d have to pay them back anyway. It’s common practice to redeem bonds out of the proceeds of new issues.
It’s hardly a scam Jason, when you take a loan out from the bank you don’t have to infinity to repay, you repay over a set term. Bonds are effectively loans, just paid in full at the end of the term rather than a bit each month.
Any chance if getting any of the dail criminals done for treason?
Borrowing money to pay back money! Sounds like smart economics to me. After all, it must be: it happens all over the world.
have your say