Swiss Franc Bond: Austria's SFr350m 10-year green bond
Landmark franc
Austria returned to the Swiss franc bond market in late January after more than a decade’s absence with a SFr350m (US$385m) February 2035 green bond.
The deal reestablished Austria in francs and the country became the first Western European sovereign to issue green bonds outside its home currency, highlighting its leadership in ESG financing. Indeed, it was the first syndicated green issue in Switzerland by any sovereign.
The deal ticked several other boxes. Austria achieved attractive funding costs compared to its euro benchmark issues and diversified its investor base.
The final print, at 19bp over mid-swaps, meant the deal came some 10bp inside Austria's 10-year euro-denominated note that had priced the day before after adjusting for the cross-currency swap.
After receiving approval from the SIX Swiss Exchange, Austria waited a few days for the basis swap back to euros to move in its favour.
The pricing outcome was even more impressive considering there were no outstanding bonds to reference, with the sovereign’s most recent franc note maturing in 2016. The pickup over the Swiss government curve was just 23.5bp.
The bond’s eligibility for repo with the Swiss National Bank was a big draw. And with Switzerland in an easing cycle that had begun in 2024, and an ever-decreasing supply of positive-yielding high-quality paper for bank treasuries and other accounts to buy, the yield on Austria's deal proved very attractive. The bond was priced at a yield of 0.682%.
The deal was twice increased during execution from an initial minimum of SFr100m.
Bank treasuries bought two-thirds of the paper, asset managers 14%, insurers and pension funds 9% each, and central banks, official institutions and corporate treasuries 1% each.
With 33 investors taking part, the average ticket was a larger-than-normal SFr10.6m.
Unusually for Swiss franc bonds, not all were sold locally. Italy took nearly 9% and Liechtenstein a sliver too.
The bond proved popular enough to increase later in the year to take the amount to SFr575m.
Austria continued to be busy more generally in the Swiss franc market, raising SFr1.4bn by mid-November. That was quite a statement given the sovereign had not issued in the currency since 2009.
Deutsche Bank was sole lead on both the initial deal and the tap.