Austria sticking to debt issue plans despite demand

VIENNA Tue Jun 12, 2012 1:34pm BST

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VIENNA (Reuters) - Austria is sticking to its debt issuance plans for 2012, the head of its debt office said after the average yield on a 10-year bond hit a record auction low, reflecting strong demand for safe-haven sovereigns during Europe's financial crisis.

Vienna has said it expects to issue 20 to 24 billion euros worth of bonds in 2012 and plans to boost total borrowing via all instruments to 27-30 billion from around 21 billion euros ($26.3 billion) last year.

"Our issuing plan is unchanged," Martha Oberndorfer, who heads the Austrian Federal Financing Agency, said in a telephone interview on Tuesday.

She said Austria continued to be able to place treasury bills at negative yields but intended to keep the average maturity of its debt long. It is now at over eight years.

She was speaking after Austria completed 60 percent of its 2012 borrowing, selling 1 billion euros in debt by topping up 2022 and 2062 bonds. The 10-year bond was 2.5 times oversubscribed, and the 50-year issue more than two times.

The average yield of 2.36 percent on the 2022 bond - down from 2.63 percent at the previous auction - was an all-time low at a 10-year tender since Austria started keeping records in 1949, Oberndorfer said.

It sold the 50-year issue at an average yield of 3.021 percent.

"There is no doubt that there are some distortions in the market so that certain countries that are seen as safe havens are seeing lots of interest at the moment," she said, citing Germany, the Netherlands and Finland as other beneficiaries.

Austrian yields had decoupled somewhat from France, she noted. While its 50-year issue in January featured a spread of 9 basis points under a similar French issue, the difference had since widened to more than 50 basis points, she said.

The fact that ratings agencies Fitch and DBRS had kept Austria on a top rating with stable outlook in the past few weeks had also helped sentiment, she said.

Standard & Poor's stripped Austria of its AAA rating this year, while Moody's has threatened to do the same given the euro zone's debt woes.

(Reporting by Michael Shields)

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