EXCLUSIVE: Austria Debt Head: Number of 2021 Syndications Hinges on Recovery Strength
23 June 2021
By David Barwick – Frankfurt (Econostream) – Economic forecasts to be released on June 24 will play a role in determining whether Austria does one or two more syndications in the coming period, according to Markus Stix, Managing Director in charge of markets at the Austrian Treasury.
In an interview with Econostream on Friday, Stix said in the context of syndications that it remained early for a decision but that the Treasury had many options with regard to maturity, two of which he specified while ruling out two other possibilities.
The Austrian Treasury’s updated plan continues to forecast a total of three or four RAGB syndications in 2021, he noted, implying ‘one or two more syndications possible for the remainder of the year, depending on how funding needs develop.’
Whether it would be one syndication or two hinges in particular on the robustness of the economic recovery, he said. ‘If the economic recovery picks up more speed than expected when the budget passed Parliament in May, then we will rather go for only one syndicate transaction’, he said. ‘But if things go as seen now, consistent with the announced volume of between €65 and €70 billion, then we would do two syndicate transactions.’
Syndication timing and maturities are undecided, he said when asked about market expectations of an Austrian deal around the end of June.
‘We expect the new economic forecasts of the Austrian Institute of Economic Research at the end of June, and this will be relevant’, he elaborated. ‘As this is the basis for the budgetary forecasts, we can then better decide if we will go for a transaction before the summer or not.’
As for preferences for a particular maturity, while too soon to say for certain, there are ‘many options’, he said, even if ‘we can definitely rule out a new 10-year and a new ultra-long RAGB, as we already issued a new 10-year at the end of January and the 50-year benchmark in April.’
‘If you look at our curve and the maturity profile, there are a lot of gaps that can be filled’, he said. ‘One is the 15-year tenor as well, but also in the 7-year there is a gap. So there are a lot of possibilities.’
‘But due to the fact that we keep a close eye on the steepness of the curve and the absolute yield level, we cannot pre-announce tenors and volumes for potential upcoming syndications now’, he added.
Given that the updated funding plan announced end-May is based on a budgetary amendment that relied on economic projections from end-March, ‘there is therefore some room for a positive surprise during the remainder of the year, depending on the economic rebound’, Stix said.
‘At the moment, we do not envisage revising the funding outlook again for this year, but in a situation like this one we must closely monitor what happens during the rest of the year. If the economic rebound continues and intensifies, we would not rule out another update’, he said.
Queried about possible foreign currency issuance, Stix said that for Austria, this rested on how attractive it would be versus euro funding. ‘If the basis swap is not in our favour, we will not go for a transaction’, he said. ‘[W]e are an opportunistic issuer, and if we have a cost saving versus our euro funding, we will enter the market. Otherwise, we fund via our euro curve.’
As for an Austrian green bond, ‘[t]here is no decision yet’, he said, ‘but together with the Ministry of Finance, we are looking at all the eligible assets for a potential green bond.’
The question of green issuance is more complicated than it would have otherwise been, given European involvement on behalf of sovereigns in the green space, he noted.
Still, ‘ESG and especially climate awareness are very important for Austria,’ he emphasised. ‘And in general, I think it is fair to say that Austria is already seen as a green issuer, which our good sustainability ratings and rankings testify to. This is taking pressure from us in terms of being among the first green bond issuers.’