Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

31. To ask the Minister for Finance the discussions he or the Central Bank of Ireland has had regarding accelerating or modifying the agreed minimum pace of sales of the bonds held by the Central Bank of Ireland issued following the liquidation of Irish Bank Resolution Corporation. [41743/14]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I have not had any discussions regarding accelerating or modifying the pace of sales of the bonds held by the Central Bank of Ireland. The timing of the sales of these bonds and the management of its investment holdings more generally are matters for the Central Bank. The Central Bank of Ireland is independent in the exercise of its functions and therefore, neither I nor the Department of Finance have any role in the matter.

As the Deputy will be aware the Central Bank acquired €25bn of Floating Rate Notes (FRNs) and €3.46bn of Government Fixed Coupon 2025 Government bonds subsequent to the liquidation of IBRC. The Bank undertook to sell the combined portfolio of the FRNs and the fixed rate bond as soon as possible provided the conditions of financial stability permit.

The Bank also indicated that, as a minimum, it will make sales in accordance with the following schedule: to end 2014 (€0.5 billion), 2015-2018 (€0.5 billion per annum), 2019-2023 (€1 billion per annum), and 2024 on (€2 billion per annum until all bonds are sold). The current schedule would see all of the bonds held by the CBI sold by c.2034. The Bank's recent Annual Report notes that sales have been made from this combined portfolio, with the Bank selling €350mn of its holdings of the Government 2025 Fixed Rate Bond in 2013. The Central Bank does not provide updates on bond sales outside of their annual report.

Under the original Promissory Note arrangement, the Government was scheduled to make annual payments of €3.1 billion thereby putting significant upward pressure on the amounts to be funded from the market. Following a long period of negotiation the notes were replaced in February 2013 with a portfolio of Irish Government bonds (as outlined above). The provision of these long-term non-amortising Government bonds to replace the amortising Promissory Notes has therefore had significant benefits from a market perspective as it ensures that there will be much less issuance of Irish Government bonds into the market over the next decade and beyond than would otherwise have been the case.

The market continues to react positively to the restructuring and we have recently seen further reduction of the 10 year bond yields to c.1.8%, far lower than had been the case before the State entered the EU/IMF programme and thus enabling the State to substantially reduce its cost of borrowings.