Republic of AustRiA Debt MAnAgeMent - Austrian Federal ...

Republic of Austria
Debt Management
Annual Review 2008
Austrian Federal Financing Agency
Mai 2009

Foreword
© BMLFUW / Bernhard Kern
© BMF / HBF
2008 was a turbulent and challenging year for the global economy.
As a reaction to the world-wide economic crisis the government of
the Republic of Austria has reacted promptly and has successfully defended
the stability of the financial system by a number of measures.
As the global economy continues to experience significant strains, the
fundamentals of the Austrian economy remain sound. According to
recent stress tests, Austria is among the most resistant countries and is
well prepared to weather the current economic crisis. The AAA ratings
from all major rating agencies confirm this view and reflect the degree
of trust into the economic and financial strength of the Republic.
In order to ensure a continuation of the economic growth and budgetary
stability the current Austrian government’s budgetary policy
is built on three cornerstones. Firstly, the government targets a balanced
budget over the economic cycle. Secondly, growth and employment
will be promoted by investments in R&D, infrastructure,
education and universities as well as in social affairs. Lastly, savings
from structural reforms will be passed on to the citizens.
I am convinced that this publication’s information on the general
government debt and on the fundamentals of the Austrian economy
will be received with interest and will yield further contribution
to the strong confidence in the fundamentals of the Republic of
Austria.
Over the past months, we have held numerous meetings with investors
from many different countries and regions. The current turmoil
on the financial markets has been an ongoing topic when discussing
the general economic developments.
Referring to the government bond market, a flight to liquidity and
a concentration towards large issuers occurred as a reaction to the
global financial crisis. This situation has created opportunities for
fundamentally oriented investors seeking quality at attractive yields.
We noticed an increased demand for information in a condensed
format. I am delighted to present this annual review and I am confident
that it will help to satisfy the increased demand for data. I
invite you to contact us for any further information you may require.
Yours faithfully,
Martha Oberndorfer, CFA
Managing Director of the Austrian Federal Financing Agency,
Debt Management Office of the Republic of Austria
Yours faithfully,
Josef Pröll
Minister of Finance
Spanish Riding School, Vienna
© Österreich Werbung / H. Graf
2 | Annual Review 2008

Economic and Budgetary Key Data for 2008
In 2008, the Austrian economy continued to grow. Real Gross Domestic
Product increased by 1.8% and reached EUR 282.2 bn. This
compares favourably to the Eurozone average of 1.1% 1 . During the
second half of the year, the Austrian economy slowed down, which
is expected to continue in 2009. Recent forecasts for 2009 expect a
2.2% decline of Austrian GDP, reflecting the ongoing contraction in
the global economy. GDP per capita reached 31,300 in 2008 which
is 24.7% above the EU-27 average. 2
Key Economic Figures
Real GDP Growth 2006 2007 2008 2009 2010
Austria 3.4% 3.1% 1.8% -2.2% 0.5%
Eurozone 3.0% 2.6% 0.7% -4.1% -0.3%
United States 2.8% 2.0% 1.1% -4.0% 0.0%
Japan 2.0% 2.4% -0.6% -6.6% -0.5%
OECD average 3.1% 2.7% 0.9% -4.3% -0.1%
4%
2%
0%
-2%
-4%
-6%
Austria
Eurozone
United States
Japan
Real GDP Growth
Unemployment Rate 2006 2007 2008 2009 2010
Austria 4.8% 4.4% 3.8% 5.0% 5.8%
Eurozone 8.2% 7.1% 7.5% 10.1% 11.7%
Inflation Rate 2006 2007 2008 2009 2010
Austria 1.7% 2.2% 3.2% 0.6% 1.1%
Eurozone 2.2% 2.3% 3.3% 0.6% 0.7%
Fiscal Balance 2006 2007 2008 2009 2010
Austria -1.5% -0.4% -0.4% -3.5% -4.7%
OECD average -1.3% -1.4% -3.0% -7.2% -8.7%
Debt Portfolio 2006 2007 2008 2009 2010
Austria 159.5 161.0 176.4 191.9 207.2
GDP Austria (bn EUR) 257.3 270.8 282.2 280.1 283.9
-8%
2006
2007
2008
2009
2010
Debt/GDP 2006 2007 2008 2009 2010
Austria 62% 59% 63% 69% 73%
Eurozone 75% 71% 71% 78% 84%
GDP per Capita
Source: OECD, WIFO and Ministry of Finance, March 09
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Luxembourg
United States
Switzerland
Netherlands
Austria
Denmark
Belgium
United Kingdom
Germany
Finland
Japan
Spain
EU (27 countries)
Czech Republic
Portugal
Hungary
Romania
Bulgaria
Austria is among the few countries which run a sustainable current
account surplus. The current account balance reached 2.9% of GDP
in 2008, after 3.2% in 2007 3 . Since 1995, Austrian exports increased
by an average 7% rate per annum, which is one of the highest rates
across Europe. The competitiveness of the Austrian economy has
been improving continuously, due to a favourable development of
labor unit costs (average real growth rate of labor unit costs since
2000: Austria -0.8%, Eurozone 0.3%), accompanied by ambitious
economic and fiscal reforms.
1
Source: OECD, WIFO March 2009
2
Source: EuroStat forecast, GDP per capita at market prices, comparison to EU-27 average
based on purchasing power parity
3
Source: WIFO, March 2009
Children at a creek
© Österreich Werbung / Fankhauser
Annual Review 2008 | 3

16
inflation in 2008
14
12
10
8
6
4
2
0
Latvia
Iceland
Bulgaria
Lithunia
Estonia
Turkey
Romania
Czech Republic
Hungary
Slovenia
Malta
Belgium
Cyprus
Greece
Poland
Spain
Luxembourg
Slovakia
Finland
United States
European Union
Denmark
United Kingdom
Italy
Norway
Euro area
Sweden
France
Austria
Ireland
Germany
Portugal
Switzerland
Netherlands
Japan
The inflation data on Austria for 2008 show a well-contained rate of
3.2% which is slightly below the Eurozone average of 3.3%.
The rate of unemployment is low compared to other EU countries.
In 2008, it reached 3.8%, down from 4.4% in 2007. Due to the
continuing contractions of the global economies, it is expected to
rise to around 5% in 2009, which is about half of the expected the
size of the Eurozone average unemployment rate. 4
The fiscal balance is expected to come in at -0.4% for 2008 and
lies considerably below the Maastricht-threshold of 3%. The level
of total debt is expected to increase to 62.5% in 2008 from 59.5%
in 2007 5 . The increase in the debt level is mainly due to measures,
the Austrian government has taken to stabilize the financial market.
The long-term chart of the development of the Austrian central government
debt level provides evidence for the prudent fiscal policy
and the conservative management of the debt portfolio. Over the
past ten years, the debt level relative to GDP has been stabilizing, as
well as the interest burden. The interest expense actually declined
from 3.5% of GDP to a ratio of below 2.5% of GDP as of end 2008.
4
Source: WIFO, March 2009
5
Maastricht-Definition, preliminary figures for 2008
comment: over the past 10 years, the absolute level of interest
payments remained more or less stable. Relative to GDP, the interest
burden declined from 3.5% to below 2.5% as of end 2008.
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Central Government Debt 1970 – 2010
EUR Million
Central Government Debt
interest payment
% of GDP
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1998
2000
2002
2004
2006
2008
comment: in the period of 1998 - 2008, the debt level has been stabilizing
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
EUR Million
Interest Burden 1970 – 2010
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
% GDP
0 0,0
1996
1998
2000
2002
2004
2006
2008
1996
%
2010f
2010f
70
60
50
40
30
20
10
0
4,0
3,5
3,0
2,5
2,0
1,5
1,0
0,5
Girl in Styrian traditional costume
© Österreich Werbung / H. Wiesenhofer
4 | Annual Review 2008

Credit Ratings
Austria is rated AAA with stable outlook by all major rating agencies.
Credit Ratings for Austria
short-term long-term outlook
Fitch Ratings F1+ AAA stable
Moody’s P-1 Aaa stable
Standard & Poor’s A-1+ AAA stable
Measures to strengthen the financial system
In October 2008, the Austrian Parliament passed two new laws: the
Interbank Market Support Act (IBSG) and the Financial Market Stability
Act (FinStaG).
The central aspects of the Austrian measures encompass four main
topics: stimulation of the interbank market (IBSG), equity-strengthening
measures for banks (FinStaG), restoring confidence in financial
markets and strengthening supervision. 6
«The ratings continue to reflect Standard & Poor’s opinion on the
country’s wealthy, modern and competitive economy, flexible labor
and goods markets and moderate wage policies that support
growth, competitiveness and employment. We believe these factors,
as well as the absence of significant asset or credit bubbles
should help Austria to weather the current economic crisis comparatively
well.»
(Standard & Poor’s, January 13, 2009)
Fitch and Moody’s also put Austria into the category of the most
resistant countries, after having applied stringent stress scenarios
on the economy and the banking sector.
EUR 75 bln
Government Guaranteed
Bank Issues
EURO 100 bln Total Package
EUR 15 bln
Capital Injections for
Financial Institutions
6
Further details: http://english.bmf.gv.at/Ministry/_start.htm.
EUR 10 bln
Deposit
Guarantee Scheme
Debt Management and Markets
The Austrian Federal Financing Agency is the government debt management
office, acting in the name and on behalf of the Republic of
Austria. Its mission includes to secure the government’s funding at
all times at the lowest possible cost while avoiding excessive risk.
In addition, it takes care of the ongoing debt portfolio and liquidity
management. Furthermore, advisory functions for sub-sovereign
entities and government-owned bodies are being provided. The tasks
are laid down in the Austrian Federal Financing Act. 7
Primary and secondary markets
The biggest part of the funding is executed through government
bond auctions, which take place in regular intervals. The auction
process is implemented on the ADAS platform. 8 In addition to the
auctions, the Republic of Austria launches one or two syndicated
issues a year. Other funding instruments include the Medium Term
Note Program, the Austrian Treasury Bills (ATB) and transactions in
loan- and Schuldscheinformat.
25
20
15
10
2009
2011
2013
2015
2017
2019
2021
2023
2025
5
0
in billion EUR
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049
End 2007
End 2008
7
Federal Act as of December 4, 1992, Federal Legal Gazette Number 763/1992 as amended
8
https://adas.oekb.at
Maturity Profile of the Republic
of Austria’s Debt Portfolio
Museum of Contemporary Art Graz
© Zepp-Cam, 2004
Annual Review 2008 | 5

In 2008, 23 Dealers have been selected as primary dealers for Austrian
Government bonds (RAGBs). The tasks of the primary dealers
include an active and lively participation in the primary market as
well as in the secondary market.
In 2008, ten bond auctions have been carried out, resulting in an
issuance amount of EUR 10.17 bln. 9
The overall funding amounted to EUR 19.98 bn in 2008.
Bond
Auctions for RAGBs in 2008
Auction
Date
Issue
Amount
EUR
Average
Accepted
Yield
3.9% RAGB 2005-2020/1/144A 09-Dec-2008 1,100,000,000 4.022%
3.5% RAGB 2005-2015/2/144A 07-Oct-2008 550,230,000 3.902%
4.15% RAGB 2007-2037/1/144A 02-Sep-2008 604,759,000 4.707%
4.350% RAGB 2008-2019/1/144A 08-Jul-2008 550,000,000 4.694%
4.65% RAGB 2003-2018/1/144A 03-Jun-2008 550,000,000 4.505%
4.350% RAGB 2008-2019/1/144A 06-May-2008 550,000,000 4.395%
4.350% RAGB 2008-2019/1/144A 01-Apr-2008 550,000,000 4.237%
4.3% RAGB 2007-2017/2/144A 04-Mar-2008 1,100,000,000 3.980%
4.3% RAGB 2007-2017/2/144A 05-Feb-2008 614,279,000 3.985%
4.35% RAGB 2008-2019/1/144A 08-Jan-2008 4,000,000,000 4.360%
Top 10 primary dealers for RAGBs in 2008
1. Morgan Stanley
2. BNP Paribas
3. HSBC
4. Goldman Sachs
5. Merrill Lynch
6. Nomura
7. Citigroup
8. UBS
9. Dresdner Bank
10. Bank of America
1. Citigroup
2. Bank of America
3. UBS AG
4. Credit Suisse
5. Goldman Sachs
6. Deutsche Bank AG
Austrian Treasury Bills
Most Active Dealers in 2008
The programme also includes a «dealer of the day»-option. ATBs
are available in different currencies and are issued on a daily basis.
There are no fixed auction dates for Austrian Treasury Bills, the terms
and conditions are negotiated on a tailor-made basis.
7
6
5
4
3
2
1
0
10 year austrian benchmark yield and
spreads versus Germany
Yield in %
AT benchmark yield (lefthand scale)
10y government-spreads
BE FR IT AT
1999
2000
2001
2002
2003
2004
2005
annual average spread in bp
2006
2007
2008
80
70
60
50
40
30
20
10
0
9
for the latest statistics see also http://www.oebfa.co.at
Hohensalzburg Fortress, Salzburg
© Tourismus Salzburg
6 | Annual Review 2008

Funding Strategy of the Republic of Austria in 2009
After the budget 2009-2010 release on April 21, 2009, the projected
total issuance volume for 2009 amounts to 28 – 34 EUR bn. This
figure includes all funding instruments.
A major part of the funding is realized through monthly auctions.
The auction calendar of 2009 is outlined as follows:
Date Value Date Volume
January 8 January 15 EUR 3 bln syndicated issue RAGB Oct 2014
February 10 February 13 EUR 1.79 bn increase of RAGB July 2020
March 10 March 13 EUR 1.72 bn incease of RAGB Oct 2014
April 7 April 14 EUR 0.89 bn increase of RAGB 2019
and EUR 0.60 bn increase of RAGB 2037
May 5 May 8 EUR 0.96 bn increase of RAGB 2019
and EUR 1.14 bn increase of RAGB 2014
June 9 June 12
July 7 July 10
Volumes and tenors are announced
(August 4) (August 7)*
one week prior to the auction date
September 1 September 4
Oktober 6 Oktober 9
November 3 November 6
December 1 December 4
*) Reserve auction date
As of End-April 2009, about 45% of the plan has been completed.
Austria has a prestigious panel of primary dealers consisting of 15
international and 6 domestic banks. The ranking depends on a variety
of factors and takes volume as well as qualitative factors into
account.
For 2009, the selection of primary dealers includes the following
banks:
Dealers for RAGBs
Barclays
BAWAG P.S.K.
BNP Paribas
Calyon
Citigroup
Credit Suisse
Deutsche Bank
Dresdner Bank / Commerzbank
Erste Bank
Goldman Sachs
HSBC France
J.P. Morgan
Merrill Lynch
Morgan Stanley
Nomura
Oberbank
Volksbank
Royal Bank of Scotland
RLB OÖ
RZB
UBS
Diversity has always been a key element in the Republic of Austria’s
funding strategy. The mix of investors is well diversified across geographic
regions and investor categories. The investor base is a mix of
around 30% domestic and around 70% international accounts. Central
banks, supranational organizations and other high-investment grade
investors are the key holders of Austrian government debt.
Funding sources include a variety of instruments, including stateof-the-art
electronic auctions of government bonds, Treasury
bills, and standardized formats like EMTN-Programs and loan formats.
The documents are available for download on the website
http://www.oebfa.co.at/d/8/index.htm.
The Austrian Treasury Bill (ATB) program is active in different currencies
and maturities:
Austria is a rare issuer. Typically, one or two deals are syndicated per
year, complementing the monthly auctions. Market share of issuance
within the Eurozone is in the range of 2 to 3%.
Liquidity of Austrian government paper is enhanced by increasing
the size of outstanding issues on a regular basis.
List of Austrian government
benchmark bonds
Benchmark Bond
Maturity
4% RAGB 1999-2009/2 15-Jul-2009
5.5% RAGB 1999-2010/4 15-Jan-2010
5.25% RAGB 2001-2011/1 04-Jan-2011
5% RAGB 2002-2012/1/144A 15-Jul-2012
3.8% RAGB 2003-2013/2/144A 20-Oct-2013
4.3% RAGB 2004-2014/1/144A 15-Jul-2014
3.5% RAGB 2005-2015/2/144A 15-Jul-2015
4% RAGB 2006-2016/2/144A 15-Sep-2016
4.3% RAGB 2007-2017/2/144A 15-Sep-2017
4.35% RAGB 2008-2019/1/144A 15-Mar-2019
3.9% RAGB 2005-2020/1/144A 15-Jul-2020
3.5% RAGB 2006-2021/1/144A 15-Sep-2021
6.25% RAGB 1997-2027/6 15-Jul-2027
4.15% RAGB 2007-2037/1/144A 15-Mar-2037
Bank of America
BAWAG P.S.K.
Barclays Capital
Citigroup
Credit Suisse
Dealers for ATBs
Deutsche Bank AG
Goldman Sachs
RZB
UBS AG
UniCredit Group Bank Austria
The debt portfolio of the republic of Austria consists of 95% fixed
rate and 5% floating rate debt, with a typical duration of between
5 and 6 and an average tenor of 8 to 9 years. In that way, the refinancing
risks and the rollover ratio compared to GDP are among the
lowest within the Eurozone countries.
Two Skiers
© Österreich Werbung / J. Mallaun
Annual Review 2008 | 7

Contact
Austrian Federal Financing Agency, Austria - 1015 Vienna, Seilerstaette 24, Phone: +43 1 512 25 11-0, Fax: +43 1 513 99 94,
Web Site: www.oebfa.co.at/e/index.htm, Reuters: AFFA01…07, Bloomberg: RAGB, AUST
Martha Oberndorfer, CFA
Managing Director,
Treasury Republic of Austria
+43 1 512 25 11-14
Kurt Sumper, MBA
Managing Director,
Back Office & Risk Management
+43 1 512 25 11-30
Treasury Contact
Markus Stix, mstix@oebfa.co.at, +43 1 512 25 11-22
Niklas Pax, npax@oebfa.co.at, +43 1 512 25 11-37
Guenther Wahl, gwahl@oebfa.co.at, +43 1 512 25 11-16
Links
❚ www.bmf.gv.at
❚ www.staatsschuldenausschuss.at/en/jahresberichte/annual_reports.jsp
❚ www.oenb.at
❚ www.wifo.at
❚ www.ihs.ac.at
❚ www.statistik.at
❚ www.oekb.at/en/capital-market/government-bonds/pages/default.aspx
Imprint:
Austrian Federal Financing Agency, Treasury of the Republic of Austria. AFFA acts in the name and on behalf of the Republic of Austria
Concept: Menedetter PR Graphics & Layout: spreitzerdrei Werbeagentur GmbH, A-1030 Wien Print: Federal Ministry of Finance
Cover illustrations: Row 1 (left to right): Museum of Contemporary Art Graz / © Zepp-Cam, 2004; Children at a creek / © Österreich Werbung / Fankhauser; Haas-House and St. Stephen’s
Cathedral, Vienna / © Österreich Werbung / G. Popp; Row 2: Fuschl am See / © Salzburg Land Tourismus; Spanish Riding School, Vienna / © Österreich Werbung / H. Graf; Cosi: Salzburg
Festival / © Franz Neumayr; Row 3: Girl in Styrian traditional costume / © Österreich Werbung / H. Wiesenhofer; Hohensalzburg Fortress, Salzburg / © Tourismus Salzburg; Two Skiers /
© Österreich Werbung / J. Mallaun