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100-Year Bond Yielding Just Over 1% Shows Investors' Desperation

John Ainger
(Bloomberg) -- The century-bond fanfare is back.Austria is looking at the possibility of launching a new 100-year security as yields across the globe drop to record lows. The nation first launched a note of that length two years ago, and it currently yields just over 1%, highlighting just how desperate investors are for returns.“It’s a great time to issue,” said Jens Peter Sorensen, chief analyst at Danske Bank A/S. “It is driven by necessity and the hunt for yield.”The drive for yield is pushing investors further out the curve as they bet that inflation is unlikely to pick up any time soon and central banks will have to shift back into injecting money into the euro-area economy. Austria has led the way in super long-dated issuance, while Belgium and Ireland have also sold 100-year securities on private placement.German 10-year bonds now yield -0.32%, close to a record low, with the prospect of more easing coming from the European Central Bank adding support. The yield on Austria’s 2117 bond has dropped nearly 100 basis points since it was launched to 1.13%.The current outlook for monetary policy and geopolitical fears, such as global trade, is likely to drive demand for the new security, according to Orlando Green, a strategist at Credit Agricole CIB.“The ongoing political uncertainty is making high quality bonds attractive,” Green said. “This is a good environment for issuers to offer long duration bonds.”Austria mandated banks to manage its upcoming 3-billion-euro five-year benchmark issue and explore the possibility of 100-year issuance subject to investor feedback.To contact the reporter on this story: John Ainger in London at jainger@bloomberg.netTo contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Scott HamiltonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- The century-bond fanfare is back.

Austria is looking at the possibility of launching a new 100-year security as yields across the globe drop to record lows. The nation first launched a note of that length two years ago, and it currently yields just over 1%, highlighting just how desperate investors are for returns.

“It’s a great time to issue,” said Jens Peter Sorensen, chief analyst at Danske Bank A/S. “It is driven by necessity and the hunt for yield.”

The drive for yield is pushing investors further out the curve as they bet that inflation is unlikely to pick up any time soon and central banks will have to shift back into injecting money into the euro-area economy. Austria has led the way in super long-dated issuance, while Belgium and Ireland have also sold 100-year securities on private placement.

German 10-year bonds now yield -0.32%, close to a record low, with the prospect of more easing coming from the European Central Bank adding support. The yield on Austria’s 2117 bond has dropped nearly 100 basis points since it was launched to 1.13%.

The current outlook for monetary policy and geopolitical fears, such as global trade, is likely to drive demand for the new security, according to Orlando Green, a strategist at Credit Agricole CIB.

“The ongoing political uncertainty is making high quality bonds attractive,” Green said. “This is a good environment for issuers to offer long duration bonds.”

Austria mandated banks to manage its upcoming 3-billion-euro five-year benchmark issue and explore the possibility of 100-year issuance subject to investor feedback.

To contact the reporter on this story: John Ainger in London at jainger@bloomberg.net

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Scott Hamilton

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.