Italy and Austria Take the Bond Market to a Very Weird Place
Ultra-long Italian debt at 2.85% is the flip-side of the same crazy coin that gave us 100-year Austrian at 1.17%. Investors are in a very weird place.
Twilight zone.
Photographer: CBS Photo Archive/CBSFor the bond market’s “tale of two cities,” look at Rome and Vienna. Both Italy and Austria have come to the market recently with ultra-long duration debt sales. It’s remarkable that the latter managed to get a 98-year issue away with a 1.17% interest rate, but Italy’s 48-year offer this week at a near 3% yield is pretty miraculous too given all of the political and economic risk in that country.
Kit Juckes, a currency analyst at Societe Generale SA, wrote on Tuesday that “the shortage of positive-yielding ‘safe’ bonds is still driving investors to overpay for what’s left.” Not half.