20 Sep 2019

Irish Economy: NTMA sells bills at -55bps

In a reminder of the current favourable conditions for the country’s debt agency, and the public finances by extension, the NTMA yesterday auctioned €500m of 12-month T-bills at a negative yield of -55bps. 

This was one basis point below a similar sale on July 18th, and marks the lowest rate for a 12-month bill issue. The bid-to-cover ratio was almost 4x.

Juncker drives Brexit optimism

Sterling jumped last night after European Commission President Jean-Claude Juncker told Sky News that he had no special attachment to the Irish backstop and he was open to a potential Northern Ireland-only backstop, if a viable plan was established. Mr.Juncker also told reporters that talks had been “rather positive.” There is quite some way to go and Juncker also added that he did not know if the chances of success were greater than 50-50, but the direction of travel is evident. 

The pound is now testing 0.88 against the euro and trading almost a cent higher against the USD at just  $1.2550.

Crude settles in a $63-$65.50 band

On Wednesday, Saudi Arabia displayed a wide range of missiles and drones that carried out the attacks last weekend. It was obvious to anyone looking at them that they represented sophisticated weaponry, not improvised terrorist or guerrilla devices. Indeed, the Saudi's were clear in identifying Iran as being behind the acts though they did not claim (as the US has done) that the attacks were actually launched from Iranian soil. They said only that they were not launched from Yemen. 

However, while the US has placed the blame squarely on Iran, Trump was far more cautious than his "locked and loaded" threat from the weekend would have suggested, initially contenting himself with imposing more sanctions on Iran (if that is possible). Responding to criticism that he was being too soft, the President then warned "There’s plenty of time to do some dastardly things.”

This brings us to the question of what Iran was hoping to achieve from this attack. Having failed to respond to one of its drones being shot down, the Iranians might have gambled that Trump is all talk and that in practice he would not have the stomach to get involved in another complicated and expensive confrontation in the Middle East, especially as the US is no-longer dependant on oil from the region. If the US does shy away from responding it would suggest that Saudi Arabia no longer has the US support it has always assumed, perhaps forcing it into an accommodation with Iran on Yemen and other issues.