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Italy joins sovereign flurry, draws record orders for new 30-year bond

By Sara Rossi
A two Euro coin is pictured next to an English ten Pound note in an illustration

By Sara Rossi

MILAN (Reuters) - Italy will print 7 billion euros of a new 30-year BTP bond after drawing record orders for the new issue as of Wednesday, as Rome took advantage of the market momentum for euro zone borrowers.

Bids for the new bond, which matures on Sept. 1, 2050, topped 47 billion euros, the highest-ever demand for an Italian syndicated issue, one of the deal's lead managers said.

Italy's sale adds to a busy start to 2020 on the bond market, with new syndicated debt placed by sovereign issuers including Spain, Ireland, Portugal and Belgium.

On Tuesday, Spain sold 10 billion euros of its new 10-year bond, attracting demand for more than 52 billion euros, the largest order book for a euro zone bond sale.

Luca Cazzulani, a strategist at Unicredit, said Italy had played its part in the beginning of year issuance period, when activity is normally intense.

"Orders for the new bond were very strong, reflecting investors appetite for yields" he said. "The timing was good too. Local elections later this month could give the market some more volatility, and investors typically buy extra-long maturities as a defensive position".

Citizens of the northern region of Emilia Romagna will vote on Jan. 26 in a key election test for the government, made up of the 5-Star Movement and the Democratic Party (PD).

Italy's borrowing costs have been falling since a new centre-left cabinet with a pro-European stance took office following the collapse in August of the previous anti-establishment coalition.

Italy has set a yield for its new issue at 6 basis points over the 3.85% Sept. 1, 2049, BTP bond, below initial guidance of around 9 basis points provided earlier on Wednesday, the lead manager said.

The 2049 BTP bond is Italy's current 30-year benchmark, which Rome sold last February in a syndicated sale, raising orders for 41 billion euros.

Italian banks are also taking advantage of the favourable market window in fixed income. Among them, UniCredit <CRDI.MI>, the country's largest bank, sold 2 billion euros of senior non-preferred (SNP) bonds. UBI Banca <UBI.MI> and Banco BPM <BAMI.MI> both sold hybrid Additional Tier 1 (AT1) bonds.

On Wednesday, state-owned Monte dei Paschi also tapped markets with a subordinated debt issue.

Barclays, BNP Paribas, Citigroup, Credit Agricole and Monte dei Paschi di Siena are joint lead managers for the issue.



(Writing by Giulio Piovaccari; Editing by Larry King and Hugh Lawson)