(Jan 27): Germany is seeking to raise €6.5 billion from its first-ever sale of new 20-year bonds, with investors piling in at a near-record rate.
Orders for the new May 2047 note exceeded €72 billion, just shy of a national record set for a 30-year bond two years ago. The price was set at two basis points over comparable bonds, slightly lower than initial guidance, according to people familiar with the matter, who asked not to be identified.
The government is aiming to increase its debt sales by expanding the range of maturities, coming after strict limits on borrowing were loosened early last year in an effort to revive Europe’s largest economy. The finance agency expected strong interest given an overhaul of the Dutch pension system — the region’s largest — has reduced appetite for longer 30-year bonds.
The offering extends the busiest ever start to a year for global bond sales as borrowers seize on investors’ buoyant appetite for debt. Other countries such as Italy and Portugal have seen orders break records.
“It’s been a very good start of the year for all these syndications,” said Evelyne Gomez-Liechti, a strategist at Mizuho International plc. “Investors are happy to have German risk at current yield levels.”
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German 20-year yields are hovering around 3.39%, close to a 14-year high reached last month. The sector is also close to the cheapest in more than a decade when compared to 10- and 30-year peers, making it appealing for investors.
Such debt has been sold on occasion this decade but those bonds were originally offered with longer maturities that then shortened to 20 years over time.
“The 20-year segment is being developed to meet demand,” said Tammo Diemer, the finance agency’s co-director, when the plan was announced last month.
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Still, the US struggled to find consistent buyers when it relaunched 20-year bonds five years ago, with a notably poor auction in May triggering a broader selloff. Steven Mnuchin, the Treasury Secretary who brought the bond back during US President Donald Trump’s first term, later admitted the move was “costly to the taxpayer”.
However, appetite for the maturity is improving, as shown by last week’s US sale that was oversubscribed by the second most on record.
Such debt syndications are typically more expensive than conventional auctions but they allow governments to raise large sums quickly while diversifying their investor base. Bookrunners on the new deal are Barclays plc, BNP Paribas SA, Citigroup Inc, Deutsche Bank AG, JPMorgan Chase & Co and Morgan Stanley.
Germany’s finance agency additionally sold new two-year notes through a conventional auction on Tuesday (Jan 27), which was also met with strong investor appetite.
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