MNI: Italy Sees 10-Yr Yield Averaging Near-5% In 2024-Official

The Italian government expects 10-year BTP yields to average very close to but below 5% in 2024 though there could be sustained periods where it could rise higher, a source from the Italian finance ministry told MNI, adding that this week’s BTP Valore issuance would easily surpass targets.

While there is a chance the yield, which has already hit 4.92% amid a global bond rout, could go higher, this is not the most likely scenario, the official said, adding that it was too soon to speculate whether issuance plans could be affected and that the debt sell-off was a natural consequence of central bank tightening and not a response to Italy’s spending plans.

“It’s happening everywhere and we can’t really do much about it,” the source said.

Last week the Italian Treasury updated its issuance plan for 2023, adding EUR13 billion more, for a total EUR333 billion.

SPREADS STABLE

While Italian officials like to stress that the spread between BTPs and German Bunds has remained stable, higher absolute yields still push up the cost of servicing its hefty debts.

A document outlining the government’s macroeconomic framework said that a rise of 100 basis points on the Italian spread in 2024 would reduce GDP growth by 0.1 points in 2024, and by 0.4 in 2025 and 0.5 in 2026. It did not mention yield levels.

Italy will “easily” surpass its EUR15 billion target from its second BTP Valore issuance this week, the source told MNI, noting that selling to retail investors was part of the country’s strategy to respond to the end of the European Central Bank purchases and to a new context of higher interest rates.

“One of the best things of this bond is the premium for holding it to maturity,” he said, noting that creating a solid base of long-term bond holders will be increasingly important for the future.