Joan Burton (Dublin West, Labour)
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82. To ask the Minister for Finance his plans to buy back high-rate loans issued at the height of the crisis; his further plans in respect of the IBRC promissory note held by the Central Bank; and if he will make a statement on the matter. [30832/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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While it may appear prudent 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 often less attractive. When bond yields fall, the market value of debt issued at higher rates goes up. This means it would cost the National Treasury Management Agency (NTMA) more to buy that debt from the investors who hold it than was originally borrowed. For example, 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.

That said, the Deputy will be aware of the steps already taken to reduce refinancing risk and smooth the debt redemption profile.

Some €23.5 billion in Programme loans from the International Monetary Fund, Sweden and Denmark were repaid ahead of schedule and replaced with cheaper marketable debt. This generates significant interest savings for the Exchequer, whose interest bill is expected to drop to €5.8 billion this year. This compares to €7.5 billion in 2014.

The NTMA has also executed bilateral bond switches – redeeming early shorter-term, higher coupon bonds in exchange for longer-term, lower coupon bonds – and, since late-2014, reduced the 2018-2020 bond refinancing requirement by €5 billion.

The NTMA continues to pre-fund and to build up its cash balances, which stood at over €23 billion at end-June. These balances can be applied towards future debt redemptions such as October’s €8.8 billion bond redemption.

As regards the Floating Rate Notes (FRNs) acquired by the Central Bank in 2013 at the time of the liquidation of Irish Bank Resolution Corporation, the Bank has committed to disposing of these assets as soon as possible, provided financial stability conditions permit.

The sole responsibility for decisions regarding disposals of the FRNs rests with the Bank. The Bank will sell FRNs in accordance with the minimum schedule of disposals agreed with the NTMA in the Exchange Option Deed.

The Bank has so far disposed of €11.5 billion nominal of the FRNs. The NTMA has purchased all FRNs so far disposed of by the Bank and in doing so, is locking in the current low market interest rates and is, in effect, taking out further insurance against interest rates rising into the future.