Republic of Austria Increases Ten-Year Bond

The Austrian Federal Financing Agency (OeBFA) decided to increase the ten-year bond because investors had already shown particular interest in this bond before the auction, said OeBFA Managing Director Markus Stix to the APA. They wanted to accommodate this interest and further strengthen the bond's liquidity.

Strong Demand for Ten-Year Bond

Usually, the OeBFA increases two government bonds simultaneously at their auctions. The reason is better risk diversification and a larger pool of available investors when multiple securities with different maturities are increased simultaneously. This time, however, the "high commitment of primary dealers" and the strong demand for the 10-year bond before the auction prompted the OeBFA to use the entire volume for the increase for the benchmark bond, according to Stix. At the auction, the bond was oversubscribed 2.21 times, and the issue yield was 2.937. The volume of the paper is now nearly 12 billion euros. With today's increase, around 90 percent of the planned financing volume for this year has been fulfilled.

Investors' General Sentiment Positive

The general sentiment among investors regarding Austrian bonds remains positive. The recent downgrade of the outlook to "negative" by the rating agency Moody's did not dampen the mood, according to Stix. The downgrade was not surprising. It is clear that Austria's government still has much to do regarding the budget and debt levels. However, it is positively received in the market that the government "appears united externally." On the interest rate side, the European environment for the bond market remains stable for the time being. No change in the key interest rate is expected at tomorrow's interest rate meeting of the European Central Bank (ECB), according to the OeBFA Managing Director. It currently stands at 2.00 percent. In the USA, however, the next interest rate cut scenario is taking shape.

OeBFA Also Active in the Swiss Market

In addition to regular auctions, the OeBFA was recently active again in the Swiss market and issued a 7-year bond in Swiss francs there. In total, the Republic has an outstanding equivalent of 1.4 billion euros in that country, and Austria is now even the largest foreign issuer in the Swiss market, according to Stix. The conditions for the securities in Swiss francs are always hedged in euros.

(APA/Red)

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