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And now for some more on Ireland’s missing bond sales.
To be sure, it’s not every day that a government puts a final price tag on bailing out its banks (and hence potential liabilities) — and then cancels a pair of bond auctions that might help towards financing those liabilities.
Hence our surprise on Thursday that the Irish finance minister Brian Lenihan decided not to proceed with around â?¬2-3bn of debt sales this autumn, out of â?¬20bn already issued.
After all, it’s a tetchy time for Irish government bonds — to say the least.
Investors continued to demand high yields in the market on Thursday, if slightly lower than in recent days:
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But here’s an interesting explanation from Ireland’s government debt agency itself — the National Treasury Management Agency.
As the NTMA’s funding chief Oliver Whelan argued to us on Thursday, there are some crucial Irish fiscal mechanics behind the decision – ones worth bearing in mind if you’re interested in Ireland’s long-term debt sustainability.
Basically, Whelan says, the NTMA is taking advantage of the fact that it’s already pre-funded into early 2011, to create what he calls a ‘breather’ in the Irish government bond market ahead of two key fiscal decisions.
Those decisions are Mr Lenihan’s unveiling of a four-year plan setting out yet more fiscal cuts in early November – and a budget in December that will largely be dictated by that commitment to extra cuts.
Whelan also gave us some detail on a ‘working hypothesis’ for planned issuance next year in light of what the minister is expected to roll out.
It includes â?¬18bn of bonds issued to finance the deficit, â?¬4bn for debt redemptions coming due next year, and around â?¬2.5-3.5bn worth of promissory notes which will go towards the annual costs of bailing out Anglo Irish — giving us â?¬24-25bn overall.
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While in Spain and Portugal…
Those are some numbers to chew on, but at any rate, the NTMA’s move underlines how Ireland faces yet another round of tough decisions on its debt even after Anglo Irish’s bailout.
The Irish fiscal situation’s also worth comparing to austerity moves in Spain and Portugal, in the meantime.
The Spanish government is planning about 14 per cent less in bond issuance next year, for example, as part of austerity budget plans already announced. Portugal has also brought its own austerity package before parliament — and that’s one to watch, given how Portuguese government debt finds itself in a similar position to Ireland’s.
Related links: Irish government debt needs you – FT Alphaville A loser’s nightmare in Europe’s debt auctions? – FT Alphaville The Rock of O’Sisyphus – FT Alphaville
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