Italy

By 2018, the European Commission will review the resolution directive that came into effect at the start of this year. In light of Italian banks’ recent struggles, maybe it's already time for a rethink.

Spain has nipped in ahead of its eurozone periphery peer Italy, mandating banks for a debut 50 year euro benchmark on the same day that the Community of Madrid had a strong showing at the short end and Greek yields rallied across the curve.

The Community of Madrid is preparing its first syndicated bond in a year, as the Republic of Italy considers following the lead of France and Belgium by publically issuing a 50 year bond.

Despite the failed IPO of Banca Popolare di Vicenza, which was bought entirely by Italy’s new bank rescue fund, Veneto Banca is expected to press ahead with its €1bn flotation. Bankers are divided on its chances of success, writes Jon Hay.

Banca Popolare di Vicenza is now Fondo Atlante’s problem. The hastily put together Italian bank rescue fund had to stump up all the €1.5bn of capital needed for BPV to avoid a bail-in this week, after there was too little demand to allow the IPO to go ahead.

Italy privately issued a long dated inflation linked bond and Spain drew strong demand at an auction of index linked paper this week, as bankers suggested interest could be returning to the asset class as investors bet on a return of inflation in the eurozone.

Italy’s scramble to prop up its weaker banks has halted a strengthening rally in periphery bank debt, while the softer tone has pushed core issuers back to the dollar market for capital.

Atlante could reach out to more potential investors after being forced to underwrite all of Banca Popolare di Vicenza’s recent IPO, but the future of larger banks remains subject to the success of structural reforms.

Monte dei Paschi di Siena is beyond the help of Fondo Atlante, according to an ECB official, but new reforms could help the bank tackle its mountain of non-performing loans.

Italy’s scramble to prop up its weaker banks has halted what had been a strengthening rally in periphery bank debt last month, with the most recent deals all widening this week.

Italy has sold a 30 year private placement with a coupon linked to the European consumer price index. Market participants are speculating that the deal indicates confidence that inflation may begin to rise.

The failure of the IPO of Banca Popolare di Vicenza leaves full responsibility for the bank’s future with the hastily put together Fondo Atlante — and is a poor omen for the listing of Veneto Banca, due to roll forward after a shareholder meeting this week.