Italy gets record demand for new extra-long bond ahead of ECB rate cut
Recasts with data, background, comment
By Sara Rossi
MILAN, Sept 10 (Reuters) -Italy's new extra-long bond launched on Tuesday attracted record demand as the country's bond yields remain attractive ahead of an anticipated interest rate cut from the European Central Bank.
Markets bet the ECB will cut its key rates by 25 basis points next Thursday after a similar move in June and analysts said Italian debt will continue to offer the highest returns in the euro zone.
The Treasury sold 8 billion euros ($8.83 billion) worth of its new 30-year BTP bond with demand outstripping the offer by over 16 times. Final orders topped 130 billion euros, the highest-ever demand for a single-tranche bond sale in Italy.
The note, due Oct. 1, 2054, saw a yield of 13 basis points over the outstanding 2053 BTP bond after an initial yield guidance of around 15 bps.
"With an approximate yield of around 4.35%, this is the most interesting BTP bond on the Italian curve," said Francesco Maria Di Bella, strategist at UniCredit.
After briefly topping 4% in June following European Parliament elections, Italian 10-year government bond yields fell by around half a percentage point to 3.55%.
Similarly, the risk premium that Rome pays for 10-year debt above what Germany pays hovered on Tuesday at around 137 basis points, down from nearly 160 bps it hit in mid-June.
Favourable conditions for Italian bonds in the first half of the year attracted more foreign investors, whose share of Italian debt holdings rose in May to 29% from 26.6% a year earlier, according to Bank of Italy data.
Rome's submission of its medium-term structural budget plan due by the end of this month, however, might dampen sentiment.
UniCredit said Tuesday's sale was probably the last Italian syndicated deal of the year and that almost 75% of the Treasury's 2024 funding targets have been covered.
Barclays, BNP Paribas, Bank of America, Citibank and Societe Generale managed the issuance.
($1 = 0.9059 euros)
Reporting by Sara Rossi, editing by Alvise Armellini and Tomasz Janowski
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