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NRW pays less than 1 percent for a 100-year bond

D.The federal state of North Rhine-Westphalia (NRW) issued a bond with the exceptionally long term of 100 years on Tuesday. The title has a volume of 2 billion euros, which investors asked for more than 3.25 billion euros. The issue yield should be 1.11 percentage points above the reference interest rate for 50-year interest rate swaps (midswaps). This was quoted on Tuesday at minus 0.14 percent, so that NRW pays an issue yield of less than 1 percent. The interest coupon is 0.95 percent.

The largest German state has thus issued its third bond over 100 years and remains the only issuer in Germany with this unusually long term. The longest term of government bonds is 30 years, and so far the finance agency responsible for the issues has shown no signs of expanding the range of terms.

100 years cheaper than ever

The issues of 100-year bonds have become cheaper and cheaper for NRW. The first title of this type was issued in April 2019 with a volume of 2.75 billion euros and an interest coupon of 2.15 percent. The rate of return is now 0.93 percent and the price is 178 percent. The second 100-year bond issue was issued a year ago. The volume was 1.3 billion euros and the coupon 1.375 percent. The rate of return is currently 0.92 percent and the price is just under 130 percent.

Austria caused a sensation with its 100-year bonds that were issued in 2017 and last summer. The title from the previous year was oversubscribed twelve times. In the eurozone, Ireland and Belgium have already issued stocks with such a long maturity. Life insurers in particular are interested in this because they can cover long-term guarantees with these papers.

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