Austria launched ultra-long Bond, 100-year

Austria is set to raise 100-year debt in the latest indication of hot investor demand for long-dated sovereign bonds. It aims to raise at least €1bn; bids from potential investors have topped €11bn, dealmakers say.
A successful sale would demonstrate that demand for super-long bonds, whose prices are extremely sensitive to interest rate changes, remains solid even as central banks start winding down their crisis-era stimulus measures.

In the initial stages, Austria is marketing the bonds at a 55-60 basis points premium over its outstanding bonds maturing in February 2047, according to bankers on the deal.

Those 30-year bonds were yielding 1.52 percent on Tuesday morning, according to Tradeweb, suggesting a yield of between 2.07 and 2.12 percent on the century bonds.

“It’s an interesting deal as there hasn’t been a syndicated bond from a eurozone sovereign in this part of the curve before,” said one of the bankers working on the deal. “We’ll be long dead by the time this matures.”

The duration of the bond – a measure of how long it takes investors to recoup their investment – is set to be around 44 years. This would make it the bond with the highest duration in the euro zone government debt market.

Among euro zone countries, only Ireland and Belgium have previously sold 100-year bonds, both via private placement, where the bonds are sold directly to a small handful of investors or even just one buyer. Those deals were also far smaller, at 50-100 million euros each.

Long-dated issuance has continued to prove popular with investors this year, with Argentina’s $2.75bn century bond issue in June being the stand-out example to date.

The duration of that debt, the amount of time it will take investors to recoup their money, was just eight years, because of its relatively high 8 per cent yield. By contrast Austria’s century bond is set to have a duration of between 40 and 50 years.

With the ECB now expected to scale back stimulus sooner rather than later, the expectation was that this bid for higher-yielding long-dated bonds would fade.

But even as central banks tighten policy, investors show little sign of retreating from the riskier debt.

Earlier on Tuesday, Austria’s debt management office said it would sell five-year bonds and 100-year bonds for a “benchmark” size, which typically means at least 1 billion euros each, and possibly much higher.

In fact, bankers working on the deal said the indications of interest were over 6 billion euros for the century bonds and over 7 billion euros for the five-year.