On September 12, Austria raised €3.5bn ($4.2bn) in 100-year bonds at a 2.112 percent yield, in a move that the market has billed as the largest ever century-long debt deal. The success of Austria’s debt issuance – with bids reaching €11.4bn ($13.5bn) – means the country will enjoy one of the lowest funding costs in history for the century ahead, according to Bloomberg.
Moreover, the bonds maturing in 2117 are the longest-dated since the country raised €2bn ($2.3bn) in 70-year securities in October 2016. Although the issuance represented the biggest in terms of the amount raised, Austria is not the first country to opt for ultra-long bonds. In total, governments worldwide issued $63.5bn in similar transactions in 2016, data collected by Dealogic showed.
In Europe, Belgium and Ireland issued €100m ($119m) last year, each in century bonds in private placements
In Europe, Belgium and Ireland issued €100m ($119m) last year, each in century bonds in private placements. Austria’s issuance, on the other hand, was an open market offering.
The trend is related to monetary policy. Low interest rates in Europe and the US – something that is slowly starting to reverse – have led funds with pension or insurance liabilities to make different choices. Today, they are opting for higher risks or long-term debt in order to cover their needs with better returns, according to Bloomberg’s analysis.
For example, Argentina issued $2.75bn in century bonds in June, just a year after it returned to international markets after a payment to its creditors to leave its 2001 default debt behind. The yield was eight percent. In addition to low rates, Austria’s achievement is also explained by its position as a high-quality issuer, given that the market priced its long-term maturities slightly higher than two percent.