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MNI INTERVIEW: Italy 2021 L-T Debt Sales May Be Below Expected
Italian Dollar Bond Sale 'Plausible' After Summer, If Conditions Right, Debt Head Says
Italy's 2021 debt issuance should fall short of initial expectations with a clearer overall picture likely in coming months, Davide Iacovoni, the Treasury's general director of Public Debt told MNI Monday, although a new dollar bond could still be issued in the later in the year if 'market conditions' are right.
"I believe that we will close under what was initially planned. In some weeks we will have a clearer picture," Iacovoni said in an interview.
MNI's own calculations suggest Italy's long-term issuance needs could total, EUR357 billion this year, less net take from the NextGen programme, although that is not an official Italian forecast (MNI Eurozone Issuance Deep Dive: August 2021 page 9).
The Treasury is unconcerned that Italy could run into an issuance wall as the European Commission starts to sell the "new European debt", Iacovoni said, seeing no direct competition to the Italian debt market from funding for the NextGenEu programme.
"At the end, (NextGen) is debt with a very different rating compared to the Italian. It is likely to have a bigger impact on countries with similar credit ratings," said Iacovoni, stressing that we still are in the initial phase of NextGen and would be clearer in the future. Italy is currently rated around the bottom end of investment grade with the new EC bonds rated just short of AAA.
Although it is too soon to tell for sure, Iacovoni said that if Italy's GDP growth for Italy is beats forecasts – as is expected -- this could lead to a lower deficit because of both increased revenues and for "an obvious" denominator effect.
DOLLAR ISSUANCE AFTER THE SUMMER
Asked about future syndications, Iacovoni said that after the summer, Italy's 2021 funding programme will be at the point where syndicated issuance will be more focused on those products traditionally sold that way, bonds "such as the BTP Green, long-dated conventional BTPs or linkers".
"We will see what the markets will look like, and we will evaluate but I expect in the last quarter that we will return to using this issuing methodology which has proved to be very effective," he stressed.
It is "plausible" to expect a new Italian U.S. dollar bond issue after the summer as well if the market conditions are right, he said. Iacovoni underlined the country's commitment to the dollar market, "being present with issuance every year on various points of the curve". He said that the reopening of dollar issuance "has certainly given new impetus to the penetration of Italian debt in various Asian markets, especially on longer-term maturities".
Asked about new marketing strategies for targeting Asian central banks after Bank of Japan governor Haruhiko Kuroda said it would actively buy foreign green debt, Iacovoni said that the marketing of Italian debt in the Far East is always very active, and he stressed that several Asian central banks are Italian debt holders "mainly on the short or intermediate maturities of the yield curve".
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.