Austrian CDStrudel | FT Alphaville

Austrian CDStrudel

One of the ironies of Greece and now Austria, simultaneously becoming the new sovereign sickmen of Europe, is that this year the two were some of the biggest issuers of government debt.

Per this (dated) note from Deutsche Bank:

Austria and Greece are at the extremes of the issuance spectrum of the euro-area countries. Greece has more or less completed its issuance for the year. Austria, on the other hand has been the slowest, having completed less than 50% of its expected issuance for the year. This supply dynamic could explain the limited spread widening for Greece and would suggest that Austrian spreads could widen further. As investors’ concerns about expected supply from euro-area countries grow and appetite for government debt declines, Austrian yields might have to move higher to attract investors.

That was written in June.

Fast forward to December and it looks like Austria has managed to complete most of its issuance.

From Reuters:

VIENNA, Nov 23 (Reuters) – Austria will issue less government bonds in 2010 than the 33 billion euros ($49 billion) it issued in 2009, returning to “more normal” levels, the head of the country’s debt agency said in an interview on Monday. “It will be less in 2010 than in 2009, it will be a more ‘normal’ level,” Austrian Federal Financing Agency (AFFA) head Martha Oberndorfer told Reuters.

“I expect that we will be just under 33 billion euros by the end of the year. We will say how much we are planning on December 3.” . . . AFFA earlier on Monday cancelled its bond auction scheduled for Dec. 1, saying it had raised enough. Oberndorfer said she had issued 32.3 billion euros by the end of October and would probably end the year with just under 33 billion euros.

That’s just in the nick of Zeit too, if Austria’s CDS is anything to go by.

Having come down from the lofty highs of over 250bps earlier this year (when worries over the country’s exposure to Eastern European woes were at their height), Austria’s CDS is ticking up again.

The below chart (from Bloomberg) is slightly out of date, but according to CMA DataVision, the country’s credit-default swap spreads widened over 8bps to 81bps Tuesday, the day after Austria moved to bail-out Hypo Group Alpe Adria, its sixth largest bank (by assets).

The move means it now costs €81,000 a year to insure a notional €10m of Austrian sovereign debt against default for five years. On Monday it would have cost €72,000.


Related links:
A heap of Hypo for Austria
– FT Alphaville
Austria rescues HGAA to avoid run on funds – FT
The hills are alive with the sound of Austrian bond auctions
– FT Alphaville