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Austria, Spain follow Italy with long-dated debt sales | Reuters

A 50-year bond sale from Austria on Tuesday will further test investor appetite for ultra-long dated debt after high demand for a similar sale from Italy last week, while Spain will sell 15-year paper.

The prospect of substantial new supply helped push bond yields across the euro area slightly higher in early Tuesday trade. Bond yields move inversely with prices.

Both sovereigns are selling their debt, also including a four-year bond from Austria, via syndication, where issuers use banks to sell the debt directly to investors, according to lead manager memos seen by Reuters.

Investors must also digest a 15-year bond reopening from Italy of up to 2 billion euros, 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, was up around one basis point to -0.29% at 0738 GMT. ING analysts said they expected Tuesday’s supply could cause long-dated government bonds to underperform.

The deals follow last week’s 50-year syndicated issuance from Italy, which received demand of nearly 13 times the five billion euros raised.

After a strong start to the year, ultra-long debt sales had slowed since February, when yields rose sharply as investors bet that a vast U.S. fiscal stimulus package would reignite growth and inflation to the detriment of safe-haven bonds.

France, Belgium and Spain had all sold 50-year bonds early in the year as they sought to lock in lower borrowing costs. But 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.

Prices of 50-year bonds, among the longest maturities issued by governments, 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 sensitivity.

On the data front, investors will be watching Germany’s ZEW investor morale survey and 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

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