Eurozone bond yields hold gains as Austria shocks markets

German, Italian bond sales add to supply glut

LONDON, Sept 13, (RTRS): Euro zone government bond yields were close to the highs hit on Tuesday after Austria said it would sell 3.5 billion euros of 100-year debt and other borrowers in the bloc lined up bond sales.

Bond yields tend to rise when there is a lot of supply in the pipeline and this week is particularly crowded as government and government-backed borrowers rush to access the market before the next European Central Bank meeting.

“I think everyone expects the ECB is going to announce tapering in October so they are trying to get their deals done now,” said ING strategist Martin van Vliet.

“But the sell off in long-dated bonds really accelerated yesterday afternoon after Austria announced the deal size,” he said.

Austria on Tuesday became the first euro zone country to sell 100-year bonds publicly via a syndication, and the 3.5 billion euro deal size dwarfed previous efforts.

Belgium and Ireland have sold “Century bonds” in the past, but only through a private placement, and for 50-100 million euros each.

On Wednesday, most euro zone government bond yields hovered around the highs hit on Tuesday.

The yield on Germany’s 10-year government bond, the benchmark for the region, was unchanged at 0.40 percent after recording its biggest daily rise since early July on Tuesday. It is now well over the 0.286 percent low hit as recently as Friday.

The Netherlands sold 10 billion euros of bonds via auctions on Tuesday. On Wednesday, Germany sold over 2.4 billion euros of 10-year bonds, while Italy sold 8 billion euros of bonds of various tenors.

The European Investment Bank is to sell 3 billion euros of bonds maturing in December 2023, according to a banker working on the deal.

“The high-duration supply is causing indigestion in euro rates markets with weaker euro and firmer risk sentiment adding to the downside in Bunds,” analysts at Commerzbank said in a note.

Lingering concerns about potential tapering in the European Central Bank’s bond-buying stimulus also cast a shadow over bond markets after a report on Friday that rate-setters agreed last week to start reducing the bond purchases, with a decision likely at their next policy meeting on Oct 26.