MNI SOURCES: Italy To Market Bonds In US As ECB Buying Slows

--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

said.

     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

complete.

     "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.

     --TLTRO UNCERTAINTY

     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: jason.webb@marketnews.com

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