Exclusive: Austria Debt Head: Too Early To Call Number of 2023 Syndications, Decision Hinges on Deficit

11 May 2023

Austria Debt Head: Too Early To Call Number of 2023 Syndications, Decision Hinges on Deficit
- Austria plans ‘to tap 2049 green bond by €1bn via auction or syndication’
- Austria ‘will continue decreasing the maturity of our new issuance’
- Green CP programme demand split 50/50 USD and euro, 1m to 3m maturity
- Reintroduction of ECB ceiling has ‘no significant implications’ for Austria’
- April syndication order book saw lot of real money investors, fewer fast money accounts

By Xavier D’Arcy – FRANKFURT (Econostream) – The Austrian Treasury will decide how many syndications it will carry out in 2023 depending on the country’s deficit needs, though it is currently too early to make a decision, according to Markus Stix, Managing Director in charge of markets.

In an interview with Econostream last week (transcript here), Stix said that Austria’s ‘syndication plans depend on the net deficit of the Republic of Austria and its funding needs. It's not based on redemptions as they are forecastable. Currently it's too early to see the progress in the budget execution.’

Austria had promised a potential three or four syndications in its funding plan for 2023, and has completed two so far.

At the end of May last year, Austria had already completed three syndications. Currently, the Treasury was ‘monitoring together with the Ministry of Finance and will decide our next steps accordingly’, Stix said.

Asked whether the country’s funding needs might change, he said it was ‘too early to judge on this, we are at the beginning of May now. A lot can happen throughout the remainder of the year.’

He said the Treasury planned to tap its inaugural green bond: ‘We have announced a total of €5.5bn from the green pillar, with more than €4bn in medium- to long-term green instruments. We have already done €3bn in the six-year tenor, so at least €1bn is left and we plan to tap the 2049 green bond by €1bn via auction or syndication.’

The Austrian Treasury’s target range for the maturity of its portfolio was still ‘10.25 to 11.75 years’, he said. As of the end of March, the average maturity was 11.3 years, and Austria’s new issuance strategy was moving towards shorter maturities, he said: ‘In the past few years, the average maturity of new issuance was above 10 years. Last year, we decreased it to 8.6 years and we will continue decreasing the maturity of our new issuance for the maturity of the portfolio to be within the aforementioned range.’

Reflecting on Austria’s green commercial paper programme, he said it had seen ‘strong demand, particularly from green money market funds, central banks, and corporate treasuries.’ In terms of the maturities and currencies which had seen the most demand, he said there was a ‘split 50/50 roughly between US dollars and euros. Tenor-wise currently, one to maximum three months.’

Austria’s most recent syndication in April was 2.1 times oversubscribed, ‘which is lower than in past years, the quality of the order book was high with a lot of real money investors, but fewer fast money accounts’, he said.

The decision to offer a 6-year green bond as part of the transaction was to help build Austria’s green curve and offer a ‘new point between the very short-term and our inaugural 2049 bond from last year’, he said. ‘For us, it was the logical next step to enable green investors to fill the gaps between the short-term and the longer tenors. If we look at the Eurozone sovereign issuance transactions, there is no outstanding green bond in the 2029 maturity range.’

The ECB’s decision to introduce a ceiling on the remuneration of Eurosystem government deposits had ‘no significant implications’ for Austria, he said. ‘This is because we have been experiencing lower remuneration for our deposits at the Austrian central bank already since last October, in contrast to many other euro area sovereigns.’

The Austrian National Bank had reduced the Treasury’s remuneration and ‘[as] a result, we have already taken steps to reduce our cash holdings at the central bank significantly and have extended our money market operations by engaging in commercial paper, deposits, and reverse repo transactions.’