Austria 70-Year Bond Hands Out Duration Lesson in First Week
- Nation’s longest bund plunges amid global-debt selloff
- Security has duration of 43 following 2 billion-euro sale
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Austria’s 70-year bond is providing traders with a perfect illustration of the perils of high duration.
The nation sold 2 billion euros ($2.2 billion) of the bunds this week, taking advantage of historically low borrowing costs. While that looked like a boon for the government, it left investors subject to extraordinary price swings. A buyer of 10 million euros of the securities saw a paper loss of more than 500,000 euros by the end of Thursday, according to data compiled by Bloomberg.