Italy

Italy carried out a syndicated buyback alongside a reopening of its October 2021 issue on Thursday, despite a steep sell-off in the sovereign’s curve throughout the day.

Speculation is rife in the government bond markets that the European Central Bank will deploy special monetary policy to support Italian BTPs. Aside from being a ridiculous idea — Italy has got itself into this mess with its own budget proposals, not because it is in a financial crisis — such support brings with it yet more rules that Italy would have to abide by in order to receive the help.

The Italian Interbank Deposit Protection Fund (FITD) has underwritten €320m of Banca Carige’s tier two capital notes. Private investors are now invited to subscribe to the issue, which allows the Italian lender to meet its capital targets.

UniCredit paid a hefty price for hitting the market this week, but it will also stand to reap the rewards.

Italy’s 10 year yield dropped to its lowest level in almost two months this week, after the country’s top government officials suggested they could target a budget deficit as low as 2% in 2019.

UniCredit found a single investor willing to buy $3bn of its non-preferred senior notes at a coupon rate of 7.83% this week, as the bank pulled out all the stops in an effort to comply with its interim target for total loss-absorbing capacity (TLAC).

Populist parties such as Italy’s Five Star Movement are winning elections on platforms of transparency, reducing waste and removing corruption. But the biggest waste of money in Italy this year has been the party’s futile budget standoff.

The Bank of Italy has said that it is concerned that the introduction of a new minimum requirement for own funds and eligible liabilities (MREL) could prove troublesome for the business operations of Italian banks, given their limited access to international bond markets.

There was little appetite for Italian inflation-linked debt this week, as Italy issued just over €2bn for its first BTP Italia sale since the sovereign’s bonds began selling off in May.

Equita, an Italian independent investment bank, has made two hires as it seeks to beef up its fixed income offering.

Investors took up just over €700m during the first two days of the first BTP Italia sale since the Italian bond market sell-off began in May, leaving the sovereign heading for a volume far less than its target of €6bn-€8bn, according to buy-side strategists.

Liberbank plans to issue its first covered bond, a transaction that will help refinance maturing debt borrowed under the European Central Bank's second Targeted Longer-Term Refinancing Operations (TLTRO). Many other banks face a similar problem, but seem to be ignoring the €399bn maturity wall that is fast approaching, writes Bill Thornhill.