The National Treasury Management Agency (NTMA) will now meet its borrowings for the first half of this month and has canceled a bond auction that was slated for June thanks to an increase in state tax revenue.
The agency, which has already raised €4.5bn of an estimated €10bn-€14bn this year, is back on the market with a benchmark bond auction on Thursday.
That week’s deal is due to bring that up to €1.25bn, or roughly the halfway point for this year’s borrowing.
But officials expect another fundraising next month to be surplus to requirements due to lower-than-expected deficits and stronger cash balances on the state’s balance sheet.
The decision marks a marked change in the state’s financial management after two years of heavy borrowing to fund the government’s pandemic response.
The last time the NTMA canceled a scheduled bond auction was in June 2020, when the agency instead substituted a major €6bn syndicated sale, loading up on additional cash to help fight COVID.
Economic and fiscal conditions are very different after just two years.
The Finance Department in last month’s sustainability program update to the European Commission forecast a reduction of just €2bn for 2022 from €8bn last year.
Figures for April treasury published last week put the deficit at just €800m on a 12-month basis, as income tax, corporation tax and VAT rolled into the public treasury.
Tax receipts in the first four months of the year were 31 per cent higher than the same period in 2021, while overall expenditure fell.
Economic growth, as measured by domestic demand, is also strong, while unemployment is back at pandemic levels.
Rating agency Moody’s on Friday raised Ireland’s credit rating to its highest level since 2010, predicting that debt dynamics will continue to improve beyond this year.
However, the cost of new government borrowing is rising – albeit from very low and even negative levels – as the European Central Bank on an interest rate hike for the first time in eight years to curb eurozone inflation of 7.5 percent. have considered.
Yields on Irish 10-year bonds now stand at 1.85 percent, having turned negative in early 2021.