NAMA announced that it redeemed €500m of senior bonds yesterday from the PCAR banks (AIB, BoI, ptsb), achieving its target of €7.5bn total redemptions by the end of 2013. This leaves €22.7bn of NAMA senior bonds outstanding that the banks received from the agency as part of asset transfers (or deposit acquisitions in the case of ptsb). NAMA intends to redeem a further €7.5bn of the senior debt by the end of 2016, and the residual of €15.2bn by 2020. <p>

We have previously noted that AIB and ptsb’s ECB drawings at June 2013 of €18bn and €8bn respectively were principally used to fund the banks’ holding of the NAMA senior bonds (HY 2013: AIB- €16.4bn, ptsb – €2.2bn). These bonds yield just six month Euribor payable semi-annually (currently 33bps), so broadly equate to a flat carry trade when compared to the existing main ECB refi rate (25bps). We see a risk that the Irish institutions (particularly AIB) may be unfairly penalised for this Central Bank liquidity assistance at the time of next year’s European stress tests.
<p><h5>Ciaran Callaghan</h5>


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