Tommy Broughan (Dublin Bay North, Independent)
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150. To ask the Minister for Finance further to Parliamentary Question No. 40 of 4 April 2017, if he will issue a direction that bonds due to mature in 2019 and 2020 be bought back now and re issue longer term bonds in their place; if not, his reasons for not taking this measure; and if he will make a statement on the matter. [18095/17]

Michael Noonan (Limerick City, Fine Gael)
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I do not intend to issue a direction of this nature to the National Treasury Management Agency (NTMA) as I am confident that the NTMA is already pursuing the optimal strategy in its management of this debt.

While on the surface it may appear attractive to replace debt that was issued at a higher borrowing cost than the cost that applies to debt issued today, the reality is more complex and less attractive. When bond yields fall, the market value of debt issued at higher rates goes up. This means it would cost the NTMA more to buy that debt from the investors who hold it than the NTMA originally borrowed. Put simply, a holder of a bond that is paying an annual coupon of 5% will not exchange that bond for a lower coupon without charging a significant premium.

To buy back the bonds that are due to mature in 2019 and 2020 would require the NTMA to issue approximately 15 per cent more par debt. This would add to the existing stock of public debt, which is already elevated.

However, the NTMA has taken advantage of the opportunities presented by lower borrowing costs by actively lengthening the maturity of Ireland's debt and by pre-funding in advance of major redemptions.  Today, Ireland has one of the longest average maturities in Europe.

The NTMA has also built up a significant amount of cash as it has pre-funded ahead of its future obligations.  Cash balances were over €15 billion at end-March.

Along with the actions mentioned above the NTMA has accelerated the buyback of the Floating Rate Notes to lock in today's market rates which is effectively the NTMA taking out insurance against rates rising into the future.  In addition, it has executed bilateral switches redeeming early short-term bonds in exchange for longer-term bonds and reduced the bond refinancing requirement by over €2.5 billion.

The net impact of all NTMA actions, including the early repayment of loans from the International Monetary Fund (IMF), has been to reduce the size of the refinancing obligation out to end-2020 from €70 billion to close to €40 billion, when account is taken of Exchequer cash balances.