April 24, 2019 / 7:50 AM / 4 months ago

UPDATE 4-Cyprus 30-year bond rush shows euro debt horizon lengthening

* Cyprus gets over 10 bln euros demand for 5- and 30-yr debt

* Deal shows extent of ECB stimulus, analysts say

* Average maturity of euro zone debt at all-time high

* Core euro zone yields dip on German Ifo, Aussie inflation (Updates Cyprus details, adds rally in broader bond market)

By Abhinav Ramnarayan

LONDON, April 24 (Reuters) - Cyprus’s first 30-year bond sale was overloaded with orders on Wednesday, with high demand for such long maturities showing just how much Europe’s bond market is adjusting to expectations of persistently low interest rates and central bank stimulus.

In broader markets, a disappointing German Ifo sentiment survey pushed German 10-year bond yields back below zero percent while borrowing costs across the bloc fell.

But it was Cyprus’s day in the spotlight.

The island nation sold five-year and 30-year bonds, with demand exceeding 10 billion euros.

The demand for 30-year debt from a country that needed a bailout from the European Union and International Monetary Fund just five years ago is remarkable and says as much about the state of the European economy and bond market as Cyprus’ prospects, debt managers said.

Several other euro zone countries have sold super long-dated debt in recent years and the average maturity of government bonds in the bloc is now at the highest level on record at nearly 7.4 years.

“It is a demonstration of the backdrop we are in at the moment and it also shows how far Cyprus has come from the crisis days,” said one of the bankers managing the sale.

Cyprus’s 10-year bond yield fell five basis points on the day to 1.51 percent in the wake of the strong demand for the new bond deals. It had touched a one-month high at around 1.61 percent in early trade.

Similarly, Cyprus’s current longest-dated bond, a 15-year note, hit a three-week high of 2.277 percent before dropping to 2.18 percent, nearly 8 bps lower on the day.

Cyprus’ banking sector ran into trouble during the euro zone debt crisis, forcing it to accept aid from the European Union and the International Monetary Fund.

The country returned to the bond markets in 2014 and has regained an investment grade credit rating from two of the three main ratings agencies.

A successful 30-year debt issue would reflect as much the broader market environment as Cyprus’ recovery, said Commerzbank rates strategist Rainer Guntermann.

“This combination of a view that growth will stay relatively sluggish and inflation will be lower and rates will stay lower almost forever is fuelling this hunt for yield, and investors are taking more risk and duration for pick up,” he said.

As if to underline these expectations of further central bank easing, data from Australia overnight and Germany on Wednesday pushed yields lower across the board.

A closely-followed survey from Germany’s Ifo economic research institute showed a further fall in German business morale, while data showed Australian inflation slowed sharply last quarter to the lowest in three years.

“The miss in Australian CPI and German Ifo this morning both point in the direction of central banks having to do more, and this is causing the rally in bonds,” said Mizuho strategist Antoine Bouvet.

Germany’s 10-year government bond yield, the benchmark for the bloc, was down 5.5 bps in late trade at minus 0.014 percent , while long-dated bond yields across the bloc were 4-5 bps lower on the day.

Reporting by Abhinav Ramnarayan; Additional reporting by Dhara Ranasinghe; Graphic by Ritvik Carvalho; Editing by Alison Williams, Jon Boyle and Alexandra Hudson

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below