With plans to issue a small note in the first few weeks of November, Cassa del Trentino was able to jump early and take advantage of strong performance in Italian government bonds last week.
BTPs rallied by over 10bp on October 31, which some analysts attributed to the Japanese Government Pension Investment Fund announcement earlier in the day of an increase in the amount of international bonds it can to hold to 15%, up from 11%.
The issuer grabbed the chance on the same day to print a €20m 20 year MTN and save itself a few basis points. Cassa del Trentino initially expected to print around a yield of 3%, but as its spread to BTPs tightened it issued at 2.96%.
Some may protest and say the costs involved with setting up and maintaining a programme are high, but the advantages — as Cassa del Trentino has showed — can often outweigh the costs.
The BTP rally was only for one day, having sold off this week. Only with the flexibility of an MTN programme could an issuer do what Cassa del Trentino did and come to market at a moment’s notice.
Establishing a programme does have its costs, largely paid to lawyers create and occasionally update the documentation. But similar costs will accrue from repeated standalone issues. So, any issuer planning to borrow more than once every few millennia can benefit from keeping an MTN programme on the shelf.