The first sovereign issue of short-dated green debt attracted over €2.2bn of demand from money market investors on Tuesday, allowing Austria to price the landmark deal at a greenium of 2bp inside its conventional Treasury bills.
The auction achieved a bid-to-cover ratio of 2.69. This compared to an average of 2.12 on the issuer's bills this year, according to the Treasury.
This indicated the offering’s “warm reception by the market”, the borrower said in a statement. Its pioneering of the new instrument reflected “the general approach of the Austrian Treasury to be flexible with regards to prevailing market demand by broadening the green securities investment universe”.
Having marketed the new product and its broader green financing strategy through a virtual roadshow on October 6, it priced the four-month issue at a discount of 99.564. This translated to an annual yield of 1.25%.
Almost all the buyers of the deal’s competitively bid portion were dedicated green investors. This group, which represented 85% of this €826m, mainly comprised money market funds and central banks.
Competitive bids totalled €2.225bn.
“The success of our first green Austrian Treasury bill issuance shows the rising demand of ESG-compliant investments also in the money market,” said Markus Stix, managing director of the Austrian Treasury.
“This is an important step for us to offer green instruments across the whole spectrum of the curve and strengthens the importance of the green pillar in our funding strategy.”
Austria sized the issue at €1bn, in line with its earlier indications. Rated at S&P’s highest short-term level (A1+/stable), the sovereign has committed to offer up to 20% of its annual green funding in bill or commercial paper format. Its eligible expenditures this year total some €5bn.
It had previously funded the rest of this year’s green spending via its €4bn green bond debut in May.
Austria plans to roll each bill series over indefinitely. In this way, it anticipates side-stepping a traditional objection that short-term debt is unsuitable for funding the long-term investments needed for climate change adaptation and mitigation.
When the debut issue matures in late February, it will move to quarterly offerings of green bills.
In addition, it will use CP to meet demand for additional maturities, as well as foreign currency green securities – particularly in US dollars.
Corrected story: Amends competitive bid total in first and sixth paragraph