Italian Sovereign

Italian yields plunged across the maturity curve at auctions this week and other peripheral eurozone issuers are expected to record similar results in early February, analysts said on Wednesday.

The snow is falling in London but the chill over the eurozone periphery has lifted. Italy and Ireland have both returned with deals, a Spanish syndication could be imminent and there is even chatter of Portugal plotting a comeback.

The triumphant return of Italy to the syndicated market with a 15 year conventional bond and a successful bills auction by the Kingdom of Spain [see separate story] has given another massive boost of confidence to peripheral Europe, already buoyed by Ireland’s €2.5bn tap issued last week.

The Italian treasury has wasted no time in returning to the syndicated benchmark market this week by awarding four banks the mandate for a new bond, following a stellar opening week for SSAs. Meanwhile, the European Financial Stability Facility (EFSF) has also elected to return to the new issue market and other borrowers will not be far behind, say senior bankers.

The Republic of Italy rounded off a spectacular week for peripheral eurozone issuers with a yield-busting auction on Friday, but the sovereign was warned to get moving on a benchmark as the sustainability of the recovery was called into question.

Bankers have demanded that the Kingdom of Spain grasp the bull by the horns and launch a benchmark as soon as possible, as the sovereign basked in the glow of a spectacular auction result and a thumping tap by the Republic of Ireland on Tuesday.

Sovereigns in Europe’s periphery looked well set up on Wednesday for what could be a busy month of issuance. Secondary yields dropped dramatically after a last ditch deal in the US to avoid the fiscal cliff.

The Kingdom of Spain topped its own size expectations in its last debt sale of the year on Tuesday — while Italian and Spanish government bond yields took a double digit dive.

The Kingdom of Spain rounded off a difficult year for bond issuance by selling more than its targeted amount at an auction on Thursday, including the first debt from a periphery eurozone issuer in the 30 year bracket in 2012. The Republic of Italy also hit all its targets in its penultimate bond auction of the year.

Spain sold €3.9bn of short dated debt on Tuesday, surpassing its maximum volume target. This was despite peripheral sovereign yields spiking on Monday after Italian premier, Mario Monti, announced at the weekend his intention to resign.

Italian and Spanish auctions this week will record subdued demand and heightened yields after news broke over the weekend that Italy’s prime minister, Mario Monti, is to stand down, said analysts.

The Republic of Italy’s 10 year borrowing costs plunged to the lowest levels seen at auction in two years at a debt sale on Thursday morning, where the sovereign all but polished off its funding for 2012.