June 24, 2020 / 3:23 PM / 15 days ago

UPDATE 1-Austria's new century bond receives nearly nine-fold demand

(Adds details, comments)

By Yoruk Bahceli

AMSTERDAM, June 24 (Reuters) - Austria received demand nearly nine times the 2 billion euros it raised from its new century bond on Wednesday, the longest-dated debt sale in Europe since the coronavirus crisis began.

Austria attracted over 17.7 billion euros of investor demand for the bond, according to a lead manager, on which it will pay a coupon of just 0.85%. That compares to the 2.1% it pays on the first century bond it sold in 2017.

Demand compared to around 5 billion euros for a reopening of the old bond last year.

“It underscores that the market has normalised and recovered from the crisis, because two months ago they wouldn’t have been able to sell this bond in that size,” said Michael Leister, head of interest rate strategy at Commerzbank in Frankfurt.

Austria’s was the longest-dated bond sale in Europe since the pandemic rattled financial markets during the first quarter. Only Israel has issued such long debt since.

Analysts said high demand reflects appetite for longer-dated bonds, which offer investors a yield pick-up against a backdrop of negative rates in Europe, as well as the need for longer-dated assets from pension and insurance funds.

“(The) order book is quite high. Not least because of the duration it brings to markets,” said Piet Christiansen, chief strategist at Danske Bank in Copenhagen, referring to the sensitivity of the bond’s price to changes in interest rates.

An ultra-long dated bond like Austria’s would be among the most sensitive to a rise in rates - but that also means it stands to gain more from a fall in rates.

Since the first sale of the century bond 2017, Austria has regularly topped it up. It is the only country in Europe to sell such long debt publicly, while countries like Belgium and Ireland have sold smaller amounts in private placements.

Reporting by Yoruk Bahceli Editing by Mark Heinrich

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