Austria set to issue century bond; bids top €11bn

Austria is set to raise at least €1bn in 100-year debt; bids from potential investors have already topped €11bn.

Source: Financial Times

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.

The deal – which initial pricing indications suggest will yield less than 2.15 per cent – is set to become the eurozone’s first syndicated century bond. Belgium and Ireland each raised €100m in century bonds last year, but those deals were private placements rather than open market offerings.

Their issuance was part of a wider trend: governments around the world sold a record $49bn of debt with ultra-long maturities in 2016.

Ultra-long maturity fixed income investment is heavily influenced by small movements in interest rates; strong demand for long-dated debt suggests investors have muted expectations for future interest rate rises.

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.

This deal is not the first time Austria has tapped investor appetite for long-dated debt: last year it raised €2bn of debt with a 70-year maturity; it currently yields 1.82 per cent.

Austria is rated Aa1 / AA+ / AAA, with a stable outlook. It is also seeking to issue five-year debt today.

NatWest Markets, Bank of America Merrill Lynch, Erste Group, Société Générale and Goldman Sachs are acting as bookrunners on the deal.