Italy Bond Diversification Seeks to Meet Investor Funding Needs

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Italy is seeking to broaden its investor base and bond portfolio to tap into huge demand for its debt.

The sale of a new BTP Short Term note on Thursday replaces the mostly domestic-orientated zero-coupon debt, and adds to a recent trend toward diversifying its bond offerings. A debut sale of green bonds smashed peers earlier this month, in a sign of investor confidence in a new product and in Prime Minister Mario Draghi’s leadership after the political turmoil of recent years.

“We expect demand for this bond to be strong,” wrote Chiara Cremonesi, a strategist at UniCredit AG. “The Treasury aims to offer a more liquid alternative at the short end of the Italian curve and attract a more diversified investor base at this tenor.”

Last year, Italy launched a BTP Futura retail bond with payments linked to the nation’s gross domestic product, adding to an arsenal of similarly targeted and longer-established BTP Italia debt. It also expanded overseas with sales of dollar-denominated bonds.

The Treasury will sell as much as 4 billion euros ($4.7 billion) of the BTP Short Term bond with a 0% coupon and maturing in November 2022, alongside an offering of as much as 1.25 billion euros of 0.4% inflation-linked debt maturing in May 2030 at 10 a.m. London time on Thursday.

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