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Underperforms in EGBs


Yld Curves Extend Steeper

--Italy To Market Bonds In US
--Will Increase Reliance On Global Bonds, EMTNs
By Silvia Marchetti
     ROME(MNI) - Italy plans to directly market its bonds in the U.S. for the
first time in decades this year and will rely more on its Global Bond Program
and new issuances of Euro Medium Term Notes after the end of European Central
Bank net asset purchases reduced demand for Italian government debt, Public Debt
Office sources told MNI.
     Italy's Treasury will be "looking to the Global Bond Program to further
diversify supply with a special focus on dollar denominated bonds," the sources
     While there is still no firm date or potential size for the return to the
U.S., it will not be a one-off, but will form part of a prolonged issuance
programme, they said. Paperwork for selling bonds under U.S. law is already
     "The focus is on the dollar" for now, but "we cannot exclude other
currencies or an EMTN format at a later stage," the sources said, adding that
Asian investors could also be targeted.
     The decision by the ECB to end its net asset purchases in December has
reduced demand for domestically-marketed Italian bonds, which could prompt the
Treasury to increase its proportion of longer-term EMTN issuance, they said.
     Uncertainty over whether the ECB will provide fresh cheap funding to banks
via a new round of targeted longer-term refinancing operations has also left the
Debt Office unsure of the likely level of bond purchases by Italian lenders.
     "It is very difficult to predict. There are too many factors at play: the
next monetary policy steps, the trend for banks to consolidate their capital,
market volatility."
     "We already have a very wide range of products that are well suited to
address several types of investors' needs," the sources said, adding that the
Treasury also planned another offering of BTP Italia -- inflation-linked bonds
targeted at retail investors - despite a disappointing sale last time round.
     "Retail is present throughout the instruments offered by the Treasury. BTP
Italia is tailored to this segment and it will be offered in 2019, with at least
one issuance", the sources said, adding that there was no specific target size
for the next BTP Italia sale.
     "New products", yet to be defined, "are also under scrutiny but will not
necessarily be targeted at retail investors," they said.
     Long-term issuance will focus on existing maturities, including 15-, 20-,
30- and 50-year nominal bonds and 15- and 30-year linkers, said the sources,
adding however that "this cannot preclude us from looking at new long maturities
using the EMTN format."
     The Treasury does not expect any significant disruption to its issuance
plans from the UK's departure from the EU, set for March 29. The Italian
government has plans to deal with the worst-case scenario of a no-deal Brexit,
with transitional measures ready to ensure the continuity of markets and
intermediaries, allowing UK and Italian counterparties to continue to operate
temporarily according to existing laws and regulations.
--MNI London Bureau; +44 203 865 3829; email:
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