LONDON (MNI) – Austria has no plans to issue its second syndicated
bond before the summer, because budget developments are favourable, the
chief of the government’s debt issuing agency told Market News
International.

In an e-mailed response to MNI questions, Martha Oberndorfer,
managing director of Austria’s Federal Financing Agency, said: “Since
Austria’s debt portfolio has a relatively high duration, we are flexible
to address specific demand and will consult with our [primary] dealers.”

She added: “Any new issue should set a new point on the curve.”

The comments came in response to a question about whether Austria
would issue a 30-year bond in its next syndicated deal. It launched a
new 7-year benchmark issue via syndication for E4 billion in January.

“No preference for a 30-year tenor was stated by the Republic of
Austria,” Oberndorfer said.

Austrian yield spreads have been widening versus German Bunds in
recent sessions on concerns about the country’s exposure to Hungarian
debt, with the 10-year spread rising as high as +96 basis points from
around +40 basis points in early June. The yield spread currently trades
at +87 basis points.

The initial concerns came after an official in Hungary’s new
government said there was a good chance Hungary would be the next Greece
and that the country could default on its sovereign debt.

Oberndorfer said Austria has no exposure to Hungarian debt.

The elevation of spreads above benchmark German Bunds seems
“irrationally high and reflects nervousness regarding the strong
franchise of Austrian banks in the Hungarian market [as well as] flight
into liquidity,” Oberndorfer said.

“According to numerous stress tests, the Austrian banking system is
strong and sound. Furthermore, the Austrian economy is doing comparably
well and has gained considerably in terms of competitiveness since the
introduction of the euro. Therefore, any concerns regarding Austrian
sovereign are clearly overdone,” Oberndorfer explained.

Austria’s 10-year yield spread widened to a peak of +143 bps on
February 18, 2009 at the height of the credit crisis, and concerns about
the country’s exposure to eastern Europe played a role.

The debt chief confirmed that E14.5 billion in bonds has been
issued so far this year.

Austria, which borrows under the name of Republic of Austria and is
rated Aaa/AAA/AAA by Moody’s, Standard & Poor’s and Fitch Ratings
Agency, is planning to sell between E21.0 and E25.0 billion worth of
bonds in 2010. That is lower than the E33.0 billion issued last year,
because of lower redemptions.

–London newsroom: 00 44 20 7862 7494; e-mail: nshamim@marketnews.com

[TOPICS: MMXBO$,MNXAU$,MFX$$$,MGX$$$,MX$$$$,M$X$$$,MT$$$$,MFXBO$]