Tomorrow the National Treasury Management Agency (NTMA) is set to auction €500m of 3-month treasury bills in its much-heralded “return to the market”. Presently the Irish sovereign bond that is due to mature nine months hence in April 2013 is trading at 3.9% per annum on the secondary market. Industry sources think that tomorrow’s issuance might attract bidding at 2% per annum, which would probably be officially considered a very good result indeed.

One of the companies that operates under the NTMA umbrella is NAMA. And last week, NAMA announced that it had repaid €2bn of its senior debt – the “senior debt” is the €30bn of NAMA bonds or IOUs which NAMA used to purchase the €74bn of loans from the banks. What interest rate was NAMA paying on its senior debt? Minister Noonan recently reaffirmed that NAMA is paying the 6-month Euribor rate which is present 0.9%. Some people are asking what sort of Keystone cop tomfoolery is at play in the NTMA and the Department of Finance that we are seeking €500m of funding from treasury bills at 2% per annum when NAMA has a mountain of cash which it could lend at 0.9%.

Aah, I hear you say, NAMA was not set up to lend money to the Irish government. Well that little fiction was defenestrated in March 2012 when NAMA was directed by Minister Noonan to provide the €3bn finance to redeem the Anglo promissory note that the Government would otherwise have funded from borrowing. And the Direction issued by the Minister explicitly referenced NAMA’s primary objective of addressing the crisis in the Irish economy caused by the banking collapse, a crisis that four years later is still ongoing with the country in a double-dip recession and experiencing record 14.8% unemployment. So there was no obstacle on this account to prevent NAMA from providing a loan.

But what is preventing NAMA from making this financing available is the commitment given by Minister Noonan to the Troika in May 2012 that NAMA would repay €7.5bn of its senior debt by the end of 2013. This means that NAMA’s mountain of cash will quickly be depleted and won’t be available for other needs. The original NAMA scheme agreed with the EU was that the bonds would be redeemed by 2020 – 8.5 years hence. So what Minister Noonan agreed two months ago was a major concession.

The Sinn Fein finance spokesperson Pearse Doherty asked Minister for Finance Michael Noonan why he did it, and although he provided a response, he had no answer. This is the full exchange (with emphasis added)

“Deputy Pearse Doherty: To ask the Minister for Finance the consideration he gave to the concession added in the most recent Memorandum of Understanding On Specific Economic Policy Conditionality whereby the National Asset Management Agency is now required as a term of the bailout, to redeem €7.5bn of senior bonds by the end of 2013..

Minister for Finance, Michael Noonan: I can advise the Deputy that there were commitments on NAMA in previous Troika documentation. The May 2011 Memorandum of Understanding with the Troika included a target for the disposal of assets by NAMA by the end of 2013.

The NAMA Board had set a target of repaying €7.5bn of the NAMA Senior Bonds in issue by the end of 2013. In the most recent meetings with the Troika it was agreed that the Memorandum of Understanding be amended to align to this more appropriate, but closely related, target.

The debt repayment target is considered to be a more appropriate measure to monitor than asset disposals, which can be impacted by currency and other external factors. The Troika seek progress reports on the target at the quarterly meetings with NAMA.”

So tomorrow when the NTMA obtain three month €500m loans at about 2% per annum which will cost this State €2.5m in interest, remember that if NAMA had provided the lending at 0.9%, we would only be paying €1.2m, a saving of €1.3m.

The CEO of the NTMA, John Corrigan earns €490,000 per annum plus a bonus – in 2012 he is waiving 15% of his salary. John Moran, the Secretary General at the Department of Finance reputedly gets €200,000 per annum and Minister Noonan gets €170,000 – all excluding perks, expenses and benefits. And yet these highly rewarded individuals have signed away freedom of action for NAMA’s cash unilaterally and failed to get any concession in return.