A 50-year bond sale by Austria on Tuesday showed issuers remain keen to lock in low borrowing costs over the very long term, following high demand for a similar sale from Italy last week, while Spain will sell 15-year paper.
Austria received 14.8 billion euros of demand for the 50-year deal and Spain received 62 billion euros of demand for its 15-year, according to memos from their lead managers seen by Reuters.
Last week's 50-year sale from Italy received demand of nearly 13 times the five billion euros raised.
After a strong start to the year, 50-year, ultra-long debt sales slowed from February as government bond yields rose on market expectations that a vast U.S. fiscal stimulus package would reignite growth and inflation to the detriment of safe-haven bonds.
However, the Italian and Austrian 50-year bond sales signal states' desire to lock in lower rates for longer is far from over.
Both Austria and Spain are selling their debt, which includes a four-year bond from Austria, via syndication, where issuers use banks to sell the debt directly to investors.
France, Belgium and Spain had all sold 50-year bonds early in the year as they sought to lock in lower borrowing costs. But the prices of those bonds all fell sharply during February's volatile patch.
The European Central Bank has since calmed Europe's bond markets by increasing the pace of its asset purchases.
Ultra-long dated bonds are seen among the riskiest that governments issue, as they are more sensitive to a change in underlying interest rates. The fact that the ECB, whose asset purchases have pinned down euro area borrowing costs, does not purchase bonds longer than 30 years adds additional risk.
The prospect of substantial new supply helped push bond yields across the euro area higher on Tuesday. ING analysts said they expected Tuesday's supply could cause long-dated government bonds to underperform. DE10YT=RR Bond yields move inversely with prices.
On top of Austria and Spain, investors must also digest an up to 6 billion euro re-opening of a Dutch bond due 2038, 2 billion euro 15-year bond reopening from Italy, 1 billion pounds of 50-year bonds from the United Kingdom, and $24 billion of 30-year U.S bonds, all to be sold via the more traditional auction format.
Germany's 10-year yield, the benchmark for the bloc rose to its highest in nearly two weeks at -0.276% and was last up one basis point at 1003 GMT.
Italian 10-year yields rose to their highest in over a month at 0.782% and were last up nearly 4 bps.
On the data front, investor sentiment in Germany fell unexpectedly in April on fears of a stricter lockdown, but this had little impact on market moves.
Later on Tuesday investors will watch U.S. inflation data. A Reuters poll expects U.S. inflation jumped 2.5% year-on-year in March, from 1.7% in February.
(Reporting by Yoruk Bahceli; Editing by Catherine Evans and Alexandra Hudson) ((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters Messaging: yoruk.bahceli@thomsonreuters.com))
