Italy

Three covered bond deals issued by Italian banks in recent days have elicited a mixed reaction from investors, particularly with respect to their value compated to senior unsecured debt.

Investors are upbeat about the prospects for Italian government bonds, believing that “market forces” will act as buffers to the effects of exuberant populist government policy. The sovereign should be supported at the long end during an auction this week, said some But in the core of the eurozone core, some investors are looking to keep things short.

BPER Banca had slightly more success than compatriot Mediobanca on Tuesday with a defensively priced €500m five year Obbligazioni Bancarie Garantite.

Italy’s Atlantia has refinanced an acquisition bridge facility with a €1.75bn five year term loan that was priced well below where the company sold 10 year bonds this time last year.

After a long hiatus, the Italian financial institution bond market exploded into life with week with two covered bonds and one debut unsecured transaction. Though demand was clearly more nuanced for the second covered bond, bankers were hopeful others would soon follow. Bill Thornhill and Jasper Cox report.

Mediobanca followed Intesa into the Obbligazioni Bancarie Garantite (OBG) market on Thursday and, despite coming with an easier to sell shorter maturity, demand was down by almost two-thirds compared to the earlier deal. Even so, bankers have not ruled out the possibility that one or two Italian banks could soon follow.

Vittoria Assicurazioni and P&V Assurances went ahead with very similar debut deals on Wednesday. But the trades enjoyed contrasting levels of success, with Vittoria the only one able to attract a substantial amount of oversubscription.

Intesa Sanpaolo has issued the first Italian covered bond since January, reopening the market with a sizeable deal that is likely to be followed by a number of other Italian issuers.

Italy faced an auction test on Thursday morning and came out with a result that traders said “wasn’t that bad”, despite the political uncertainty facing the country.

Holders of a highly scrutinised UniCredit capital instrument hold a very small proportion of the bank’s equity, according to a source familiar with the matter. This could mean they are more likely to follow the recommendation of activist investor Caius Capital and push for the bank to exchange the notes.

SC Lowy co-founder and CEO Michel Löwy talks to GlobalCapital about developing a DCM business, Italy and entrepreneurship.

In an age where the triumph of populism has shown that communication trumps all else in politics, it’s strange that the Italian iteration of this trend is struggling with something that couldn’t be clearer — its sovereign debt auction schedule.