Austria’s 70-Year Debt Sale Expands Europe’s Ultra-Long Universe

  • Nation sells 2 billion euros of bonds due in 2086 via banks
  • Belgium and Ireland sold century bonds earlier this year

The exclusive club of European countries to have sold debt due in 50 years or more just got bigger.

Austria sold 2 billion euros ($2.2 billion) of bonds due in November 2086 via banks, according to a person familiar with the matter. The sale follows this year’s century bond offerings from Belgium and Ireland, as well as 50-year deals from France, Italy and Spain, as countries take advantage of historically low interest rates to issue ultra-long debt. The 100-year bond sales by Belgium and Ireland were private placements for 100 million euros each.

“Many issuers have been extending the average maturity of their funding,” said Martin van Vliet, a senior interest-rate strategist at ING Bank NV in Amsterdam. “It makes sense for them to try and lock in low funding costs for a long time. On the demand side, there are still many buyers out there like pension funds and insurance companies that want to buy these bonds for hedging purposes.”

Austria’s 30-year bund yields fell two basis points, or 0.02 percentage point, to 0.99 percent as of 3:10 p.m. London time. The 1.5 percent security due in February 2047 rose 0.592, or 5.92 euros per 1,000-euro face amount, to 113.419. The yield on bonds maturing in January 2062, the nation’s longest-dated outstanding debt, dropped two basis points to 1.17 percent.

The 70-year bonds were priced to yield 53 basis points more than that on the February 2047 security, the person said. The Treasury in Vienna also sold 3 billion euros of notes maturing in July 2023.

Investor interest in multi-decade debt has increased as the European Central Bank’s asset-purchase program crushes yields on shorter-dated securities. The amount of government debt due in 10 years or more has swelled by a record $733 billion this year, having more than doubled since 2009 to about $6 trillion, data compiled by Bloomberg and Bank of America Corp. show.

Duration Risk

The rush into higher-yielding, long-term bonds has taken a key bond-market metric known as duration to historic levels. The higher the duration gauge goes, the steeper the losses will be when rates rise.

The effective duration on Bank of America’s global government bond index climbed to an all-time high of 8.23 in 2016, from 5 when it began in 1997. The metric set a record 5.9 for U.S. obligations, 7.2 across the euro area and 8.8 in Japan. A one-percentage point increase in interest rates equates to about $2.1 trillion in losses for global investors, based on a Bloomberg Barclays sovereign-debt index.

    Before it's here, it's on the Bloomberg Terminal.