MNI SOURCES: Italy Not Extending Debt Maturity Profile Post-QE

--Foreign Currency Issuance To Be 'Investigated', Dollars First

By Silvia Marchetti

     ROME (MNI) - Italy is not looking to further extend its debt maturity

profile to tackle the possible repercussion of interest rates hikes by the

European Central Bank as monetary policy becomes less accommodative, an Italian

Treasury source told Market News in an exclusive interview.

     "The plan for this year is to consolidate the results achieved in the last

couple years in terms of average maturity and interest rate risk exposure.

Extending further will not be easy, as in 2018 we will be having less

redemptions than in 2017," said the source, a member of the ministry's public

debt department.

     Italy's public debt has an average residual maturity of longer than seven

years, which, according to both the Bank of Italy and the Rome government,

ensures that a rate increase would pass through to the average cost of debt very

gradually.

--MORE 20-YEAR ISSUANCE

     The Tesoro source said that due to their successful introduction earlier

this year, further 20-year BTPs issuance is expected in 2018: "We will be

reopening the bond in the coming months to improve its liquidity and match

demand needs."

     Another tranche of BTP Italia inflation-indexed bonds will also be placed

on the market in the next few months. Although there were no details on what

size the Tesoro is targeting this time, it was thought the total would be along

the same lines of past issuances.

     "We are happy with the size we reached in the 2 transactions of last

year,", said the source, when each sale raised roughly E7-8 billion.

     Although the era of ultra low rates is expected to end relatively soon,

there are no plans in the long run to lock in low rates for extended maturity

bonds above current 50-year BTPs.

     "We now have a large presence on longer dated bonds (15/20/30 and 50

years). We will of course continue to monitor the market but our presence on

maturities longer than 50 years will depend, in the end, on the existence of a

large pool of structural demand coming from real money accounts, something that

we do not see in the current context," the source argued.

     The Tesoro does not intend to change its index-linked issuance profile

either. "We will continue to be regular on all tenors on linkers. If the market

allows, we will try to issue more than last year, spreading the supply on all

maturities," the source said.

--DOLLAR BONDS

     Further foreign currency debt issuance, mainly in dollars, is currently

under consideration, though much will depend on market appetite.

     "With the CSA (credit support annex) arrangements (for collaterals) to be

shortly in place, in order to sign potential CCSs (cross currency swaps), we

will start investigating the market to understand if and how we can go back

initially to the global bond market in dollars," the source said.

     Other foreign currencies issuances may follow but on a later stage, he

added.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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