NTMA issues Inflation-Linked Bond maturing in 2045

26 March 2019 - The National Treasury Management Agency (NTMA) announces it has raised €300 million through the placement of a new Inflation-Linked Bond maturing in April 2045. This is the second Inflation-Linked issue, the first being a €609.5 million issue in April 2017.

The Bond was issued as a private placement under Ireland's Euro Medium Term Note (EMTN) Programme. The principal repayment will be linked to the Eurostat Harmonised Index of Consumer Prices (HICP) for Ireland, excluding tobacco.

The Bond has a tenor of 26 years and will mature on 1 April 2045. It was issued at a negative real yield of minus 0.05%.

Frank O'Connor, NTMA Director of Funding and Debt Management said:

'This transaction is an attractive form of borrowing which allows us to harness demand from Irish institutional investors.

Providing an Irish Inflation-Linked bond gives these investors, who would otherwise invest in other Eurozone Inflation-Linked instruments, an investment that is tailored to their specific requirements. This allows us to borrow for a long duration on competitive terms.

It shows our commitment to continued diversification of our issuance activity whenever we see opportunities to meet investor appetite that are consistent with our borrowing requirements'.

The transaction was executed through Davy on foot of a number of reverse enquiries by Irish investors.

Notes to Editors:

This is the NTMA's second Inflation-Linked private placement under its EMTN programme. A placement is different to a normal benchmark bond issuance in that Primary Dealers are not obliged to make ongoing prices in the bond. While the bonds are tradable, an investor typically will hold them to maturity in order to match a liability.

The demand for this Bond came from investors who have Irish Inflation-Linked liabilities. In the past, they may have used Inflation-Linked bonds issued by another euro area nation as a substitute.

The price of the bond reflects the real yield at issue. The real yield is the yield on the bond excluding inflation. This bond was issued at a negative real yield of -0.05%. The overall nominal return on the bond will depend on the future path of inflation.

With the coupon on the bond set at 0.00% this will result in no annual coupon payments being made by the NTMA. Investors who hold the bond to maturity will receive their return in the form of a principal repayment that will be calculated on the basis of Irish inflation (as measured by the Eurostat Harmonised Index of Consumer Prices (HICP) for Ireland, excluding tobacco) over the lifetime of the bond.

However, the principal is protected against a fall in the index over the life of the bond - i.e. if inflation over the bond's lifetime is negative, investors will still receive the principal amount in full.

Inflation-Linked bonds have become an increasing component of the European bond market in recent years. France, Italy and Germany issue between 6% and 10% of their debt in the form of Inflation-Linked bonds.

In the euro area, consumer price inflation is measured by the Harmonised Index of Consumer Prices (HICP). The term 'harmonised' denotes the fact that all the countries in the European Union follow the same methodology. The HICP is compiled by Eurostat and the national statistical institutes in accordance with harmonised statistical methods.

HICP measures the average change over time in the prices paid by households for a specific, regularly updated basket of consumer goods and services.

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