MNI INTERVIEW: Austria Targets Barbell Debt Sales Strategy

Austria could tap longer-maturity bonds again this year but has no need to lengthen its portfolio, the head of the country's debt agency told MNI, adding that it is still considering whether to issue green bonds,

The Austrian Treasury has already sold an additional EUR200 million of RAGB 2120, and has not ruled out further taps of longer dated issuance, the managing director of the Austrian Treasury's markets division, Markus Stix, said in emailed responses to questions.

"Austria already has the debt portfolio with longest average maturity in the eurozone," Stix said, when asked whether now would be a good time to lock in more 30-year issuance. "There is no urgent need to lengthen the portfolio much further. However, we are continuing our barbell strategy to issue both short as well as long."

So far this year, Austria has issued RAGBs with tenors between 2023 and 2120, with an average maturity of over 14 years, he said.

PROTECTED AGAINST POST-PEPP SCENARIO

Austria is "well protected against potential interest rate increases in a post-PEPP scenario," Stix added, referring to the European Central Bank's ongoing pandemic emergency purchase programme, whose eventual unwinding he acknowledged might lead to some upward pressure on eurozone government bond yields and/or spreads. Around 90% of Austria's outstanding debt is fixed-rate.

Asked whether Austria will sell foreign currency bonds in 2021/22, Stix replied that it would depend on the relative cost advantage. Stix did not rule out selling new syndicated maturities in 2021/22, but pointed out that so far in 2021 Austria has issued one new RAGB maturity (2031), and has announced a total of three to four syndicated euro issues. No decision on whether to issue green bonds has been taken.

Total 2021 issuance should be around EUR65 billion, with RAGB sales accounting for at least EUR40 billion.

Austria's funding experience this year has been "positive," with about 20% of the year's projected programme completed by Feb. 18, Stix said. A new 10-year syndicated issue was oversubscribed 9-fold, despite yielding -0.331%, the lowest for any 10-year sovereign conventional bond ever issued worldwide in syndicated format.