In two hours on Thursday afternoon, the fiscal space available for the budget suddenly expanded.

Earlier in the week, the Government had already said how it would use it.

Just before 3pm, the National Treasury Management Agency issued €1.25 billion in bonds without recording a significant rise in the interest rate it will have to pay on them. The largest tranche, €700 million maturing in May 2035, achieved a yield of 3.42%. 

While this is higher than the 3.24% recorded for the previous issuance in a similar 10-year range in July, the rise remains manageable. Government forecasts made at the end of last year allowed for €520 million in increased debt servicing costs for Budget 2027 after a €475 million rise already this year, as cheap bonds issued during the pandemic come up for refinancing. These figures will now be higher, but not significantly.

This outcome was anything but a sure bet. Since the NTMA’s last bond auction, investors have become increasingly weary of Government debt, spooked as they are by the US’s runaway military spending in the Middle East and continental Europe’s ballooning Exchequer deficits. 

As Peter explained on Wednesday, this affects primarily long-end bonds such as those maturing in 30 years, of which Ireland sold €450 million at a 3.82% yield in July. Bondholders are now seeking over 5% from the US and almost 6% from the UK to commit to this kind of duration. This sentiment then tends to trickle down into shorter-term bond yields.

Ireland did not issue debt beyond a 10-year horizon this week, so we don’t know yet how this autumn’s market turn against long-term sovereign debt would affect this country.

At the main 10-year benchmark, however, Irish debt remains relatively cheap. Several EU countries, including heavyweights France and Italy, are now paying more than 4% on their 10-year bonds.

By contrast, Ireland is closer to the yields achieved by best-in-class, AAA-rated debt in the bloc. Fitch rates Irish debt one notch lower, in the AA category. Another agency, Moody’s, upgraded Ireland’s rating last month to Aa2, its third-best.

It is good news that borrowing costs are contained, albeit at a higher level, because Ireland is set to continue borrowing a significant amount. At 4.30pm on Thursday, the Department of Finance published an update on the position of the Exchequer at the end of August. 

It has recorded a deficit of €1.8 billion so far this year, almost entirely accounted for by €1.7 billion in transfers to the Future Ireland Fund and Infrastructure, Climate and Nature Fund – the State’s two saving pots for the future.

This year’s budget was built on the expectation that the usual increase in tax receipts in the fourth quarter would fill this gap and bring the Exchequer back into a surplus position by the end of this year.

But the Fiscal Advisory Council is already warning that spending overruns are eating into this plan, with current expenditure already 8% above Budget 2026 forecasts. In particular, “the health overspends rose from €0.4 to €0.7 billion in August. This puts it on track to be the second largest health overspend in over a decade,” the council noted. 

Tax revenue, meanwhile, is 5.5% above forecast. The watchdog previously calculated that the budget parameters as set by the Government for 2027 would result in the Exchequer having to borrow to put money aside in its two savings funds next year.

“Have it, spend it”

This is after yet another surge in corporation tax receipts in August, a month when the bulk of this revenue comes from Apple. The IT multinational drove a one-third increase in monthly corporation tax compared with August last year, adding €692 million to State coffers.

All through last year, Exchequer figures came with a health warning, reminding the public that they included the €1.7 billion tail-end of once-off payments from the 2024 EU court decision on Apple back taxes paid in early 2025.

None of this applies in 2026, and yet, now that Apple has paid its regular dues for this year, the corporation tax take is back at the same level as it was including the EU court windfall last year – around €18 billion.

This comes with well-flagged risks. Not only are public finances dependent on the performance of a handful of US multinationals, but this concentration is increasing – at the time Apple’s future profits are suspended to the performance of his new CEO.

Tánaiste and Simon Harris certainly had sight of the Exchequer figures when he went to Tuesday’s back-to-school cabinet meeting – though he could not predict the steady bond yields achieved two days later.

His approach was reminiscent of Charlie McCreevy’s “have it, spend it” attitude. As reported by The Irish Times and Thejournal.ie, he hinted at an increase in the €1.5 billion package of income tax cuts promised in the Summer Economic Statement. This would be matched with an increase in other tax revenue, such as bank levies or tobacco excise, he added.

Or, maybe, another gamble on ever-increasing corporation tax.

Elsewhere last week…

The entity issuing Israeli state bonds to EU investors told them to hold off after its prospectus expired at the start of this month. Niall had the latest on the controversial Irish-domiciled process.

A UK subsidiary of the Dublin construction firm ABM has been at the centre of a court battle involving trade secrets, a hard drive loaded with sensitive files, and an alleged concocted story of a management coup. Jonathan told the full story.

Ireland’s obsession with the provision of tea trolleys on trains has resulted in the trial of a fully commercial pilot on the Dublin-Galway line. Alice spoke with the parties involved.

I interviewed social media consultant Michael Corcoran, previously known for putting Ryanair on the online map. One year after founding his company Slice, he is confident he has finally found the business model he had been chasing for the past 15 years.