Italy

Investors in the SSA market are piling into long dated bonds, leaving aside any coronavirus-driven fears and swelling the order books on 30 year and 50 year paper to record breaking levels, in what bankers are calling a 'one way market'.

The yields on bank bonds have reached their lowest ever levels in recent weeks, thanks to meagre issuance and accommodative central bank policy. These conditions mean investors can see the silver linings, but not the clouds — and there are plenty — behind them.

Italy printed €9bn with a 15 year benchmark on Tuesday, wowing onlookers with a new Italian order book record and a 4bp move from initial price thoughts.

Banco BPM tightened pricing by nearly 30bp for its debut non-preferred senior bond on Tuesday, with investors backing Italian credits as a source of value compared with other assets in the euro area.

Italy is on screens with a 15 year benchmark, opting for the long end of the curve in spite of the concern some bankers have expressed about the difficulty of selling long dated debt.

Shares in UniCredit, Italy’s largest bank by assets, closed 8.1% higher on Thursday after the bank cut its stake in Turkey’s Yapi Kredi, while announcing a dividend increase and a share buy-back.

Italy’s government is seeking help from the equity capital markets to spur the country’s ambitious plans for a greener economy. Sources say the market is ready to support this effort.

Bonds sold by Banca Monte dei Paschi di Siena were surging higher in secondary market trading this week, amid reports that the Italian bank was close to agreeing plans to offload a €10bn portfolio of non-performing loans.

Cassa Depositi e Prestiti will come to market on Tuesday with a 10 year euro benchmark financing social housing projects in Italy.

The cost of insuring against default on Italian bank bonds has fallen to its lowest point in over a year, after investors embraced the result of recent regional elections in the country.

Banca Monte dei Paschi di Siena wrapped up its second deal of the month on Tuesday, capping off a busy period for Italian deal flow in advance of important regional elections.

Investors have been showing a clear preference for subordinated bank bonds in the primary market, with the valuations for more senior asset classes having been squeezed into extraordinarily tight levels in 2020.