The NTMA's double tap

12 Feb 2019

Ireland’s NTMA released the details of Thursday’s scheduled auction yesterday. Subject to market conditions, the NTMA will tap the 1.1% Treasury Bond 2029 and the 1.7% Treasury Bond 2037, raising between €1.0bn and €1.25bn in the process. Those bonds closed at yields of 90bps and 144bps respectively yesterday.

Last month the NTMA raised €4bn from the syndicated sale of the 2029 Treasury Bond, so Thursday’s move will bring year to date proceeds from bond sales to up to €5.25bn, which compares to the full year funding target of €14-18bn. For the NTMA, raising long-term funding at (implied) negative real rates is clearly very good business, particularly as this cheap funding is helping to meet the cost of retiring expensive legacy borrowings (this year’s scheduled Sovereign bond maturities carry coupons of 4.4% and 5.9% respectively, with a combined €13bn outstanding).
 
GRN/HBRN/IRES: Seamark offered for rent
 
Today’s Irish Times reports that Chartered Land is now offering its recently refurbished 182,500 sq ft office asset at Elmpark Green, The Seamark Building, for rent.
 
Seamark, which is the largest vacant office building in Dublin, has just finished a €45m refit. Chartered Land is aiming to rent it for c. €35 per sq ft, pricing that reflects its status as one of the better suburban office assets.
 
The c. 2,000 workers that the building will accommodate when fully let will be of interest to IRES REIT, which owns 201 apartments in the wider Elmpark Green development. These were 99.5% occupied at end-June, with an AMR of €1,558, while the book value of IRES’ interests at Elmpark equated to c. 8% of the value of its property assets at end-H118. As Seamark will likely account for >5% of the total office take-up in Dublin this year, the reception (and pricing) it secures from the market may also be of interest where GRN and HBRN are concerned.
 
UK Q4 GDP growth falls short of expectations
 
Yesterday the ONS reported that UK GDP growth had slowed from +0.6% in Q3 to +0.2% in Q4, undershooting consensus and Investec expectations for a +0.3% outturn. Growth for the year as a whole slowed from 2017’s 1.8% to just 1.4%, the weakest recorded for six years. This came as coinciding December figures showed that output had contracted by 0.4% (mom), against expectations for it to be flat and the sharpest fall recorded since March 2016. This dismal conclusion to 2018 was on account of a broad-based sectoral deterioration with the manufacturing, construction and services sectors all contracting on the month. Our judgement is that there are two key factors behind the weakness in GDP. First is that Brexit uncertainty looks to be weighing heavily on capital expenditure plans, with a 1.4% fall in business investment in Q4 registering as the sharpest sequential fall since Q1 2010. At the same time the global economic backdrop has deteriorated, with the UK trade deficit in goods widening to £36.7bn in Q4, the largest shortfall recorded since August 2017.
 
US government shutdown averted (in principle)
 
Democrat and Republican negotiators reached an agreement in principle to avoid another
shutdown after current government funding appropriated runs out after Friday 15 February. In the draft deal, President Trump would receive some cash for fences along the Mexico-US border, but with $1.375bn allocated this was a far cry from the $5.7bn the President has fought hard for. There were also concessions made by the Democrats including the omission of a new cap on immigrants detained within the US. Note that whilst a tentative deal has been reached this does now need to be backed in the House, the Senate, and signed by the President. The White House is said to be reviewing the draft deal whilst Senate Appropriations Committee Chairman Richard Shelby, the key GOP negotiator, said he was hopeful Trump would be supportive, but criticism of the draft deal has already been raised by conservatives. Indeed, Republican Mark Meadows of the House Freedom Caucus (talks often with Trump), said “This does not represent a fraction of what the president has promised the American people,” and that “I don’t speak for the president but I can’t imagine he will be applauding something so lacking.”
 
Brexit latest
 
The UK Prime Minister, Theresa May will today table her latest Brexit motion, which is intended to outline the government’s plans to continue talks with the EU with the aim of extracting concessions on the Irish backstop. This is a day earlier than some had expected but gives MPs a couple of days to table their own amendments ahead of this Thursday’s debate and votes. It is expected that Mrs. May will offer the UK parliament a vote on other Brexit options by the end of February at which time she should bring her deal back for another ‘meaningful vote’.
 
Economic releases 
 
13.00 UK BoE Gov Carney Speaks
15.00 US JOLTs Job Openings
17.45 US Fed Chair Powell Speaks