Ireland has raised €1 billion in 10-year borrowings at a record low rate of 0.33 per cent, taking advantage of the extraordinarily low interest rates at play in international markets.

The National Treasury Management Agency (NTMA) held an auction of the existing 2026 bond on Thursday morning, and received bids which covered the amount sought 2.45 times.

Bond interest rates have been at all-time lows on international markets and European bonds have been supported by a a massive buying programme by the European Central Bank. With recent weak economic data persuading investors that central bank stimulus would continue, the NTMA was able to raise the 10-year money at a record low rate.

Key advantage

Last April the agency raised €750 million in an auction of the same bond at an interest rate of 0.817 per cent. The ability to raise money at an even lower rate this time will help to hold down the overall cost of servicing the national debt, a key advantage to the exchequer in recent years.

Borrowings with a shorter term were previously raised at a lower rate, but Thursday’s auction was a record low for 10-year debt. In May the NTMA raised €750 million through the auction of a 2022 bond at a yield of 0.157 per cent. The NTMA has stayed out of the market since then, deciding to avoid raising new borrowings around the Brexit vote.

Higher interest rates are typically demanded for longer-term borrowings, but the NTMA has the advantage of locking in cash for 10 years at a low rate. The NTMA has now raised €6.5 billion in new borrowing this year. Its annual target is to raise between €6 billion and €10 billion. It has not committed to another further fundraising in the third quarter, but if current low interest rates persist it may well be tempted to re-enter the market.

Total exchequer debt-servicing costs in the first eight months of the year were 0.9 per cent below the same period last year and interest payment costs are running 2.3 per cent below budget forecasts.