JOE BRENNAN

The National Treasury Management Agency plans to sell €1 billion of bonds on Thursday against the backdrop of rising market interest rates, bringing total long-term debt issuance this year to €7.5 billion.

The State’s debt agency will sell bonds that mature in 10 years, the NTMA said in a statement on Monday. The agency has targeted selling between €6 billion and €10 billion of long-term securities this year.

The market rate, or yield, on Ireland’s 10-year bonds, which fell to an all-time low of 0.31 per cent at the end of September, have since surged to almost 0.53 per cent, their highest level in almost a month, as investors fret about the impact of Brexit and the European Central Bank’s bond-buying programme.

The yield on Germany’s 10-year bonds, a benchmark for the euro zone, which was as low as -0.16 at the end of September, has since rebounded to 0.05 per cent.

While most of the market's attention post-Brexit has been focused on foreign exchange activity, with sterling currently trading at five-year lows against the euro, at about 90p, Ryan McGrath, head of fixed income strategy at Cantor Fitzgerald in Dublin, said there was a threat of contagion spreading to bond markets.

“Is sterling the canary in the coal mine? We, like most others, were surprised by the bond market reaction since the Brexit referndum,” said Mr McGrath.

Still, while euro zone bond markets were rattled by reports last week that the ECB may gradually wind down its bond-buying activities before its €1.7 trillion quantitative easing programme is due to conclude in March, there remains an expectation in the market that ECB will remain in the market beyond that date as inflation remains low.

In addition, bonds globally are likely to continue to benefit from their so-called safe haven status in the coming weeks as investors eye the US presidential election on November 8, according to traders.

Meanwhile, the latest Department of Finance figures, contained in the pre-budget White Paper published on Saturday, show that the Government will likely need to borrow only €242 million, or 0.01 per cent of gross domestic product, next year to plug an expected shortfall between spending and revenue.

However, the NTMA is expected to remain active in the market in 2017 as it faces refinancing some €23.3 billion of Government bonds that mature over the next three years.