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Strong Demand for Austrian, Greek Bond Sales

AMSTERDAM, Jan 27 (Reuters) - Austria and Greece bond sales won strong demand on Wednesday, joining larger peers who issued debt via syndication earlier in the month.

Austria received 40 billion euros of investor orders and Greece 25 billion euros for their new 10-year bonds. . Slovenia is also in the market selling a 60-year bond, according to a lead manager memo seen by Reuters.

All three governments are issuing via syndication, where a borrower hires investment banks to sell the debt directly to end investors, allowing it to issue larger amounts and reach a wider investor base.

They join larger governments like Italy, Spain and France who sold bonds via syndication earlier this month as part of the usual January cycle, most receiving record demand as investors bet that European rates will stay lower for longer.

Richard McGuire, head of rates strategy at Rabobank in London, said the deals on Wednesday were further indication of demand outstripping the supply of bonds in the bloc thanks to European Central Bank bond buying.

“Buoyant demand, even for a high-beta issuer like Greece (shows) financial repression is the order of the day,” he said, referring to low interest rates.

Iceland also hired banks to sell a potential seven-year bond, another lead manager memo seen by Reuters said.

Elsewhere, Germany raised 3.3 billion euros from the re-opening of a 10-year bond via auction.

Its 10-year yield, the benchmark for the region, was up about 1 basis point to -0.53% at 1124 GMT.

“We expect to see some relative stability during the session ahead, without too many catalysts on the schedule,” Mizuho analysts told clients, adding that the bond sales should not put pressure on the market given they are rare from the issuing countries.

Italy’s 10-year yield was unchanged at 0.61% after dropping 9 basis points during the previous two sessions, on hopes that Prime Minister Giuseppe Conte’s resignation could help form a new government in Rome.

The closely watched gap with Germany’s 10-year yield - effectively the risk premium on Italian debt - was at 113 basis points, off highs above 120 bps touched last week on worries around a potential snap election.

“BTPs (Italian bonds) may have less of a strong day ahead, simply given yesterday’s decent performance (after PM Conte resigned), but we look for further peripheral tightening to come,” Mizuho analysts said.

Focus was also on the European Central Bank, where governing council member Klaas Knot said the bank still has room to cut its deposit rate further, from the current -0.50%, if needed to improve financing conditions.

Atttention turns to the U.S. Federal Reserve later on Wednesday, where Chairman Jerome Powell will likely reiterate that it is too early to discuss tapering the bank’s asset purchases.

(Reporting by Yoruk Bahceli; Editing by Andrew Cawthorne and Angus MacSwan)

Source: Reuters

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