Italy

Italy’s economic recovery has not yet encouraged an increase in corporate bond issuance, with Italian companies still focusing more on deleveraging than on raising new finance to support capital expenditure or M&A activity. The result is a striking imbalance between supply and demand in the Italian corporate bond market which has led to new issues from frequent as well as less established borrowers being heavily oversubscribed. In this GlobalCapital roundtable, which was held in December, issuers and intermediaries gathered to discuss the outlook for the supply-demand dynamic in the Italian corporate bond and loan universe.

Italian banks have come through a challenging year as pressures — from regulators, markets and the economy — waxed and waned. Issuers and investors have had to navigate the looming introduction of the Bank Recovery and Resolution Directive, Total Loss Absorbing Capacity and Minimum Requirement for own funds and Eligible Liabilities, which have changed the dynamics between senior unsecured paper, covered bonds and capital issuance. The Italian market also felt one of the strongest impacts in the eurozone from the European Central Bank’s quantitative easing programme, which provided cheap liquidity and tightened issuance spreads, but in some cases appeared to drive investors away and into higher-yielding asset classes. Meanwhile, an economy clawing its way back to health continued to impose a heavy burden of non-performing loans, and legislative reforms left smaller players in the sector looking for merger partners. In this roundtable, held in early December, leading funding officials and bankers gathered to discuss these issues and more.

Balanced budget laws and government-backed refinancings are keeping Italy’s sub-sovereigns out of the bond markets, writes Phil Moore.

The Italian banking sector is adjusting to life in the new European regulatory landscape but the key senior unsecured and tier two markets are proving difficult for some. Virginia Furness reports.

The Italian Treasury enjoyed an enviable 2015, as for once the country’s political scene was a beacon of stability, at least compared to certain other European countries. That stability is one of the reasons cited for BTPs outperforming Spanish government debt in 2015 — while Spanish bonds suffered turbulence during a year of regional and general elections, Italy’s government looks like being the first in many years to survive a full term in office. With an executive that has been able to drive economic, legal and political reforms through a parliamentary system notorious for inducing stalemates, investors are hopeful that strong economic indicators could evolve into real growth in 2016. Italy is not immune to the forces that have disrupted markets and macroeconomic outlooks across Europe and beyond — from dwindling liquidity in secondary markets to banks leaving primary dealerships, and struggling emerging markets dampening demand for the country’s exports. But the country also has advantages that many of its European peers lack — not least the unflinching demand for government debt from its vast retail investor base that has allowed it to print some of the largest bonds ever seen in the government debt markets. GlobalCapital gathered together investors, bankers and representatives of Italy’s finance ministry to discuss the outlook for the country’s debt in the international bond markets.

Italy’s army of retail investors represent a big opportunity for asset managers and bond issuers alike, with high yield companies likely to receive the warmest reception of all. Phil Moore reports

With a €2.2tr debt mountain, Italy needs to keep the pressure on in its privatisation programme. 2015 has some some impressive successes, including the sale of a stake in CDP Reti to State Grid Corporation of China and the €3.4bn IPO of a minority stake in Poste Italiana, and there is plenty in the pipeline. Phil Moore reports.

Italy scored a string of remarkable successes in the bond market in 2015, issuing some of the largest long-dated syndicated deals of recent times and seeing its spreads tighten. And with structured reforms, political stability and a growing economy, the country looks set for an equally impressive 2016. Phil Moore reports

Economists have more reason to feel upbeat about Italy’s prospects now than in years, but a lot hinges on the prime minister’s reform agenda and the European Central Bank’s quantitative easing programme, writes Phil Moore

Italy’s economic outlook

In May 2013, Salvatore Rossi was appointed senior deputy governor of the Bank of Italy, where he has served since 1976. In this interview with GlobalCapital’s Phil Moore, he shares his views on the prospects for the Italian economy, banking industry and capital markets.

Over €30bn of covered bond supply is expected from borrowers in Spain and Italy next year but with nearly €40bn of Cédulas redeeming, the technical backdrop is most constructive in Spain.