MNI INTERVIEW: Austria May Sell More Ultra-Long Bonds In 2020

Austria could issue more ultra-long maturity bonds in both 2020 and 2021, and is open to the possibility of a return to foreign currency debt markets, a senior Austrian finance official told MNI, adding that the European Central Banks' eventual unwinding of its pandemic emergency purchase programme may lead to upward pressure on yields.

"We do not fully rule out that we might issue ultra-long bonds this year or next," Christian Schreckeis, Head of Issuance and Portfolio Management, Investor Relations and Federal Budget at Austria's Treasury, wrote in response to emailed questions. Whether Austria looks to sell FX bonds over the same period "always depends on the relative cost advantage compared to funding in euro," he added, though he did not discount the idea.

Austria's funding experience this year has been positive, Schreckeis told MNI, with a year-to-date bid-cover ratio at RAGB auctions of 2.8 - the highest in the euro area, and above the 2019 average for RAGB auctions of 2.2. Syndicated new issues were oversubscribed eight-fold, compared with six-fold in 2019.

NEW MATURITIES

"This clearly underlines Austria's good standing as a safe-haven issuer on the capital market," he said, while pointing to the eventual phasing out of the ECB's EUR1.35 trillion PEPP, which is set to end next year, as a factor that could lead to "some upward pressure" on EGB yields or spreads.

So far this year, the Bundesfinanzierungsagentur has issued three new RAGB maturities, for 2023, 2030 and 2051, and is continuing to investigate new lines, Schreckeis said. It follows Austria's announcement in June of a return to 100-year bond issuance, with a EUR2 billion bond, which yielded 0.88%.

RAGBs issued this year amount to EUR34.5 billion as of Sept. 10 this year, with T-bills outstanding amounting to EUR5.8 billion as of the end of August, Schreckeis said.