The National Treasury Management Agency (NTMA) yesterday auctioned € 500 million in three-month Treasury Bills with a yield of 0.0 per cent - the lowest rate of return ever offered on Irish Government debt.
The zero per cent rate means investors were essentially lending the Government money for free.
Even with the record low yield, the NTMA said the auction was strongly over-subscribed with total bids amounting to nearly €2.5 billion - five times the amount on offer.
Surging investor demand has driven down bonds yields in Ireland and across the euro zone to record lows.
The NTMA last sold three-month Treasury Bills in June, when it auctioned the same amount at a yield of 0.105 per cent.
Investec chief economist Philip O’Sullivan said the NTMA was simply rolling over the €500 million issued in June and that there was nothing particularly significant, from Ireland’s perspective, in the zero per cent yield.
“Money market funds have to invest on a sub 12-month horizon and there’s so little issuance compared to what’s maturing that they’re kind of forced into buying.”
Meanwhile, the European Central Bank has came under renewed pressure to implement some form of quantitative easing after a lower-than-expected take up of its latest cheap credit programme.
The scheme, a central plank of the ECB’s efforts to coax reluctant banks to lend, saw Frankfurt hand out €82.6 billion of €400 billion on offer to 255 banks.
That was well below the €100-€140 billion take up forecasted by money market traders.
Nonetheless, banks will get a second chance in December to apply for the cash - granted at ultra-low interest rates on condition they lend it on to businesses.
Traders said the low take-up raised expectations the ECB may eventually take more radical monetary stimulus measures, such as printing money to buy securities - quantitative easing, or QE - although there is strong resistance in Germany to such a move.
Separate figures from the Central Statistics Office yesterday showed Irish exports fell sharply in July, while imports increased.
The figure show exports declined by 16 per cent or €1.2 billion to €6.4 billion compared to June, and were down 11 per cent or €832 million on the same month a year earlier.
Coupled with a 7 per cent monthly jump in imports to €4.68 billion, the seasonally adjusted trade surplus fell by 46 per cent or €1.5 billion to €1.8 billion from June - its lowest level since December 2007.
The figures show a big decline in exports of chemicals and pharmaceuticals over the year to the end of June. Organic chemical exports were down 39 per cent on an annual basis to €988 million, while the value of medical and pharmaceutical exports declined by 19.3 per cent to €1.65 billion.
“The pharmaceutical sector accounts for approximately a quarter of total Irish exports and half of merchandise exports, and the patents issue is still there in the background, though not as big a problem in 2014 as in recent years,” Alan McQuaid, chief economist with Merrion Stockbrokers said.
Recovery in Ireland’s main export markets has has been reflected in the strong performance of merchandise exports in the first half of 2014, up 13.1 per cent in volume terms, he said.
“However, whether the strong performance holds up for the rest of the year remains to be seen. The July data would suggest an easing off, though that said, chemicals exports can be quite erratic at the best of times,” he added.
Additional reporting by Reuters
