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Dáil Éireann díospóireacht -
Wednesday, 24 Feb 1999

Vol. 501 No. 1

Written Answers. - Government Bonds.

Enda Kenny

Ceist:

133 Mr. Kenny asked the Minister for Finance the extent of the Irish Government bond market; his views on its application in the context of the Irish economy; and his projections for its future. [5332/99]

The extent of the market in Government bonds may be assessed by reference to annual gross issuance by the National Treasury Management Agency, NTMA, in the primary market and turnover in the secondary market. The amounts involved in respect of those in recent years were as follows:

1996

1997

1998

(a) gross annual issuance: £billion

2.4

2.4

1.4

(b) annual turnover: £billion

116

111

68

Secondary bond market turnover, which is based on data collected by the Irish Stock Exchange, was particularly high in 1996 and 1997 reflecting strong demand for Irish Government bonds in anticipation of yields converging with German bond yields in the run-in to EMU. However, as convergence had largely occurred by end 1997, turnover fell in 1998. This was a common feature of Government bond markets generally in the euro in 1998.
The application of the Government bond market is primarily to fund the Government's financing requirements, that is, any shortfall between income and expenditure, together with the amount needed to fund maturing debt. The lower level of gross bond issuance in 1998 reflected the Exchequer surplus in that year.
As regards the future of the Government bond market, I refer the Deputy to the statement by the NTMA in November 1998, outlining revised arrangements for bond issuance procedures and related debt management, including the primary dealer system. Under these arrangements, the NTMA recognised six primary dealers, with the obligation of quoting, on demand, firm bid and offer prices in each bond notified from time to time by the NTMA. The primary dealer structure is designed to add depth and liquidity to the Government bond market. It is envisaged that the NTMA and the recognised primary dealers will commit themselves to these arrangements for a period of at least two years. However, in the event of a material change in market circumstances either the NTMA or the primary dealers may seek to amend those arrangements; and, fol lowing consultations between the NTMA and the primary dealers, the NTMA may revise the arrangements.
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