The Republic of Austria has returned to the euro market with a heavily oversubscribed 20-year note, wasting little time in raising funds after the release of its latest budget, and taking advantage of a market window ahead of the EU.
The deal comes the day after finance minister Gernot Bluemel announced plans to run a deficit of 9.5% of economic output this year, with €6.8bn to be spent on the so-called Kurzarbeit layoff prevention scheme - an equivalent of the furlough scheme.
"Yesterday, the Austrian government published the forward-looking budget, which made clear to the treasury team what their financing requirements were into year-end," said a banker.
"I am sure it is not coincidental and they could have looked to do it another time, but knowing there is an EU trade to come around the corner, why would you wait? If you have got a clear window in the market to do what you need to do before the EU, then I think that makes perfect sense."
The €2.5bn no-grow October 2040 note priced at mid-swaps less 4bp, 2bp tighter than IPTs, via Bank of America, Goldman Sachs, JP Morgan, Morgan Stanley, Nomura and UniCredit.
Final pricing came with 1bp of new issue concession, according to a banker away, while a lead saw it flat to fair value.
Order books closed over €18.4bn, including €850m joint lead manager interest.
"They got a pretty strong book," said DCM banker. "It's definitely a good sign demand-wise for the EU next week."
While the forthcoming EU issuance was perhaps a consideration in the timing of the trade, it was not that big a factor, according to a syndicate banker.
"Is the EU really in competition with Austria? I don’t think so really," he said.
"The govvies live in their own world and they have a plan, and they don’t really look left or right.”
MORE LAENDER DEALS
Meanwhile, two German names brought deals on Thursday, with a six-year benchmark from Schleswig-Holstein and Bavaria tapping its May 2029 paper.
Schleswig-Holstein's €500m no-grow October 2026 note priced at mid-swaps less 5bp, unchanged from guidance, via Barclays, DekaBank, Helaba, HSBC and JP Morgan.
The final price offered 1bp new issue concession, according to one lead, while another saw it as flat to fair value.
The last update showed demand at over €520m, including €50m joint lead manager interest.
"We are a bit surprised it went so well," said the same syndicate banker.
"We have seen some other trades that had problems covering the initial size, but there were no such problems there," he said.
"It was easy going. It was not overwhelming, but no one would expect that with all this other stuff out."
At the same time, Bavaria raised a further €250m with a no-grow tap of its May 2029s, with the total outstanding now €500m.
The deal was priced at mid-swaps less 5bp via sole lead BayernLB, unchanged from guidance.
There was no update given on order book size.