Investors value Austria’s high domestic wealth and institutional strength
The Republic of Austria, with a population of 8.9 million, has the 4th highest GDP per capita in the Euro area, 20% higher than the Euro Area average. Apart from its high domestic wealth and its well diversified economic activity, investors value the country’s institutional strength reflected in its high rankings in the World Bank Governance Indicators such as ‘Rule of Law’ (7th out of 209 countries), Government Effectiveness (18th out of 209 countries) and Regulatory Quality (19th out of 209 countries). Investors also appreciate that the Republic has entered the COVID-19-crisis with ample fiscal capacity, a strong labour market and its banking sector in robust shape. Furthermore, the mountainous country – the Alps covering over 60% of its territory – has achieved top positions in various sustainability rankings.
Before this transaction, the Republic of Austria has already completed over 20% of its 2021 total funding programme following their 10-year benchmark sovereign bond in January, with a plan to issue 3 to 4 syndicated transactions over the course of this year.
Second highest notional ever raised by the Republic of Austria in a single syndication
For its second 2021 syndication, a dual tranche 4-year and 50-year transaction, the Austrian Treasury selected NatWest for the role as Joint Bookrunner.
Despite a flurry of sovereign issuances in early spring, orders from investors flooded in within two hours of order books opening, leading to a preliminary order volume of over EUR 18 billion for the 4-year tranche and over EUR 14 billion for the 50-year bond. Demand continued to grow even as pricing tightened, attracting overall demand of more than EUR 42.3 billion, which led the Austrian Treasury to opt for a EUR 4.5 billion deal volume at a 0.000% coupon for the 4-year note, and a size of 2 billion with a 0.700% coupon for the 50- year tranche.
115 different investors participated in the 4-year and 130 investors in the 50-year tranche, re-affirming the breadth and quality of Austria’s investor franchise.
With a total issuance volume of EUR 6.5 billion, this transaction marked the second highest notional ever raised by the Republic of Austria in a single syndication. Furthermore, Austria set a record with their 4-year tranche, which achieved the lowest spread (over Germany) for any Austrian government bond ever issued, and the lowest yield for any new 4-year sovereign conventional bond issued worldwide in syndicated format.
A testament to Austria’s ‘safe-haven’ status
Commenting on the transaction, Antoine Imbert, Primary Dealership Manager, NatWest, said: “We’re delighted to have supported the Austrian Treasury with this record setting dual tranche transaction. While this is a very busy period for sovereign issuances, the Austrian offer stood out, with investors rushing to invest in the ‘safe haven Austria’, which is underpinned by its very strong credit credentials.”
Markus Stix, Managing Director of the Austrian Treasury, noted: “This successful issue is part of Austria’s barbell strategy and contributes further to Austria’s already high debt sustainability. We are very pleased that our issue was met with such strong demand despite the deeply negative interest rate.”
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