ECB policy reduces the yields of European sovereign bonds — more than half of the bonds have a negative yield. In order not to lose on the enclosed, the investor has to choose more long-term bonds. Already several countries in Europe — France, Belgium, Ireland, and now Spain issued 50-year debt securities.
Spain is preparing to issue government bonds with very long maturities in years 50, that is, in the year 2066. According to reports, the Spaniards are planning to attract about €2 billion according to Reuters, intermediaries in the placement will make the largest Western banks: Barclays, BNP Paribas, Caixobank, Citigroup, Santander and Societe Generale.
The interest of issuers and investors to superlong bonds occurs in Europe because of the economic stimulus programmes, that is, against the background of record low rates (the benchmark interest rate at 0%, Deposit rate — at 0.4 per cent and the quantitative easing program by the European Central Bank. ECB policy has reduced the profitability of short-term bonds. According to the Financial Times, French bonds yield a negative income when maturities of up to seven years, German — up to nine years. In total, more than half of the debt securities of the Eurozone do not bring profit.
Average profits bonds with maturities from one to five years on the maturity date is only 0.6%. In addition, for securities with a term of 10 years, this figure is 8.5%, and for bonds with a term of 15 years was 9%.
“The consequence of low interest rates is that investors who need a positive income, are willing to buy longer-term debt securities”, — quotes the edition of the words of Fund Manager Schroders Thomas Sartana.
“Financial management of the countries takes this generous opportunity to release a very, very long paper with a rate of return well below the average values”, — quotes Bloomberg the opinion of strategist for fixed income Cantor Fitzgerald Owen Kellan.
The main demand for such paper comes from investors like pension funds or insurance companies, which were included in the portfolios of longer-term securities. And issuers, while there is demand, further postpone the maturity date of the issued bonds.
Spain is not the first country that recently produced the so-called “masharskii” bonds (called so by the name of the oldest person whose age was listed in the Bible).
Earlier this spring issue 50-year bonds produced by France and Belgium. Writes the FT, the Irish and the Belgians the same in closed court placed a 100-year-old paper. Spain rushes to join this “club” by making a long term investment deals before those who are just starting to look at potential market. “It is obvious that the later the Issuer will be released on the market, the less will be its base of investors,” said Bloomberg Commerzbank strategist David Schnautz.
In Spanish there is already several potential competitors.
The demand for 50-year bonds currently is estimated in Italy. The decision to release 42-year-old bond has taken Switzerland.
The trend is already reflected in the statistics. Released in the first four months of this year, European sovereign bonds more than a quarter have a maturity of 12 years or more. Is the ratio of long-term and short-term securities reached for the first time since the Foundation of the Eurozone in 1999.
