It is not the first time but the estimated 10-year yield on Irish government bonds has again fallen below 3 per cent. Here is a snap-shot of the yield curve this morning from this site.
The reasons for these historically low rates can be bounced around but it would be more useful if we could actually take advantage of them. Ireland has an enormous public debt but the structure of it is such that very little is close to maturing and in need of rolling over. In the EZ17 Ireland has a very low refinancing need (Latvia is excluded).
At the end of December the blended interest rate on the €22.5 billion of IMF loans that Ireland has accessed was 4.16 per cent. These loans have a weighted average life of 7.3 years. The above table gives an indicative rate of under 2 per cent for Irish government debt of equivalent maturity. Two per cent of €22.5 billion is €450 million.
Replacing the official IMF loans with private funding seems attractive but the IMF loans cannot be repaid early without also triggering early repayment clauses in the €45 billion of EFSM, EFSF and bilateral loans from EU countries. The details of these clauses are in this PQ answer.
Compared to the IMF loans, the EU loans have lower interest rates and much longer maturities. Repaying them early would not be prudent given the uncertainties and possible unknowns that remain. However, raising money now for loans which begin amortising next year anyway would only raise the funding target of the NTMA to the average EU levels (in GDP terms) as shown in the chart. On the other hand it is not clear what impact such an action would have on interest rates but a significant impact would seem unlikely.
There are reasons on several sides for keeping the IMF as part of the ongoing Troika supervision of Ireland but are there €450 million worth of them?