(Vienna) Austria sparked the enthusiasm of investors on Wednesday by offering a new bond for 100 years, an exceptional duration made attractive by the weakness of returns on traditional stocks and the economic uncertainty created by the coronavirus crisis.
Posted on 24 June 2020 at 16 h 56
France Media Agency
For this loan of 2 billion euros, offers reached nearly 18 billion and the country was able to get a rate 0, 88%, spectacularly low for a security of this maturity, according to figures from the Austrian Treasury.
The bond will mature in June 2120.
This is the third time since 2017 that Austria, one of the strongest economies in the euro area, has issued in a hundred years. In a context of historic drop in rates, investors are flocking to securities still offering returns.
However, even for these durations unthinkable a few years ago, the cost of borrowing collapses since three years ago, the Alpine Republic obtained an interest rate of 2.1% , increased to 1.2% a year ago.
Usually, the longer the reimbursement, the greater the risk of default and the higher the rate.
In the financial markets, States have traditionally issued ten-year bonds, the long term generally being 30 years.
But some States no longer hesitate to issue very long-term debt, known as “Mathusalem”, for 50 years or even 100 years, which seduces investors desperately in search of safe securities, still offering returns.
Argentina and Mexico have already issued centenary securities. France, for its part, has always refused to issue beyond 50 years.
Through the public support and recovery programs it imposes, the coronavirus crisis will explode state debt.
For developed countries, the situation is rather favorable for debt with very low or even negative rates, but emerging countries are in a much more difficult situation.
In the dismal table of its forecasts for the world economy published on Wednesday, the IMF warned against a risk of “disconnection” from the financial markets carried by the unprecedented level of State aid and the low rates of interest.
