I propose to take Questions Nos. 135 and 136 together.
I am advised by the National Treasury Management Agency (NTMA) that the Exchequer cash/liquid asset balances were just over €25 billion at end-June 2019.
It is important to give some context to this large balance.
The NTMA is continuing with its strategy of pre-funding to meet future redemptions. It adopts a prudent approach to the Exchequer’s funding requirement which gives it confidence that it can meet the Exchequer’s funding needs, irrespective of the risks – such as Brexit – that might emerge.
The NTMA issued €10.4 billion of benchmark bonds in the first half of the year. This means that almost 75% of the minimum of the €14-€18 billion 2019 bond funding range has already been completed. This issuance had a weighted average yield of just below 1.2% and a weighted average maturity of 18.5 years. There is a bond auction of €1 billion scheduled for tomorrow, 11 July and a further auction planned for September. The NTMA also raised €0.3 billion earlier this year through the issue of an inflation linked bond, bringing total medium and long-term issuance so far this year to close to €11 billion.
Over the next 15 months there are three Government bond maturities totalling €23 billion. Over that same period five tranches of the UK bilateral loan will mature. This brings total medium and long-term debt maturities to over €25 billion in that time.
It is important to note that increased activity in short-term markets means that over half of the current cash balance is funded from short-term debt; some of which will be repaid before year-end.
The NTMA has already repaid one bond this year – €7.1 billion in June – and there is a second bond maturity of €6 billion in October. The first tranche of the UK bilateral loan matured in April and two more tranches will mature before year-end; one this month and one in September. Each maturity amounts to £0.4 billion.
The cost of holding cash balances has been mitigated by the favourable interest rate environment which has allowed the NTMA to issue short-term debt at negative interest rates. The estimated cost of the portion of the cash funded from medium to long-term bond issuance is approximately €1 million per month per €1 billion of borrowing.
The NTMA have advised me that the cash balances will decline in the coming months such that it expects to hold approximately €13 billion at year-end.