Italy

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.

Banca Popolare di Vicenza has been refused a listing on the Milan stock exchange after its IPO failed to attract sufficient private demand, leaving Fondo Atlante to underwrite the entire capital raise and sending Italian bank shares tumbling on Tuesday.

Banca Popolare di Vicenza’s board is to meet later this afternoon to consider the results of its €1.5bn IPO, for which the bookbuild closed earlier today (Friday April 29).

Rating: Baa2/BBB-/BBB

UBI Banca became the first Italian lender to print tier two capital this year on Wednesday, laying the foundations for more periphery capital to follow.

Periphery bank capital is back on the menu for investors this week, leaving FIG bankers feeling they can bring virtually any product to market for the first time since early January. And thanks to Vakifbank, that now includes Turkish covered bonds.