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Austria Doubles 2020 Borrowing to $68 Billion on Virus Aid

John Ainger and Boris Groendahl
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Austria Doubles 2020 Borrowing to $68 Billion on Virus Aid

(Bloomberg) --

Austria has nearly doubled its borrowing plans in order to help cushion its economy from the worst of the coronavirus crisis, the latest sign of the drastic funding needs being drawn up across the continent.

The country will now raise about 60 billion euros ($68 billion) from debt operations in 2020, an all-time high, according to the Treasury. That compares to a prior estimate of just over half that. At least 35 billion euros will be by way of government bond offerings.

Also, Austria will conduct a further one to two syndications this year, which has been a popular way for nations to raise large amounts of cash. Austrian bonds fell, underperforming their European peers, with 10-year yields climbing four basis points to -0.03%.

European countries have ripped up their initial spending plans after the coronavirus forced millions of citizens to stay at home, closing shops and factories across the region. Even frugal Germany has unveiled a landmark stimulus package to help its economy weather what is set to be the steepest recession since World War Two.

The European Central Bank’s 600 billion euro boost to its pandemic bond buying program will roughly match the additional debt supply by euro area nations, Treasury Managing Director Markus Stix said in an interview.

“Supply and demand are matching again and that means rates should remain relatively stable,” he said.

Ten-year bond yields remain below 0%, due to their status as one of the safest assets to hold in Europe. That means that the government is effectively paid to borrow out to a decade.

Volatility

Given that market volatility has risen, the Treasury will announce auctions two days later than they used to from July, said Stix. Demand for longer-dated bonds, especially those in the 30-year part of the curve, has returned, he added.

Austria has already completed over 40% of its borrowing needs so far this year, the Treasury said.

Italy saw record demand this week for 10-year bonds at a syndication, receiving over 100 billion euros of orders. Unlike conventional auctions, they are typically used for new issues or to mobilize a large amount of money. But borrowers must pay a premium to banks that underwrite the sale and the pricing is often attractive to investors.

(Updates with prices in third paragraph.)

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