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Italy, Spain Plan Bond Sales to Take Advantage of Yield Slump

Italy, Spain Plan Bond Sales to Take Advantage of Yield Slump

(Bloomberg) -- Italy and Spain are rushing to take advantage of a slump in long-term borrowing costs across Europe with debt sales this week.

The nations’ bonds will attract investors craving positive returns in a European market getting flooded with negative yields, after a rally in the past week spurred by the European Central Bank’s hint of fresh stimulus. Spain is expected to syndicate an estimated nine billion euros ($10.2 billion) of 10-year debt Wednesday, while Italy has mandated banks for an offering of 20-year bonds, according to a person familiar with the matter.

Italy, Spain Plan Bond Sales to Take Advantage of Yield Slump

Investors are being pushed into riskier or into longer-dated European debt, as haven German bonds offer below zero. Sovereigns are flocking back to the market after yields across the continent hit record or multi-year lows, following a similar flurry of syndications at the start of the year.

Spain’s “launch may be too good to miss,” said Peter McCallum, a fixed-income strategist at Mizuho International Plc, who anticipates investors waiting for a selloff may throw in the towel and pick up the debt. “If one is looking to buy into euro rates then Spain is still attractive.”

Tradition dictates Spain’s sale is due Wednesday, after six banks were mandated to handle the offering on Tuesday, with Mizuho estimating the size at nine billion euros. Spain last syndicated 10 billion euros of 10-year debt in January, after receiving a record 46.5 billion euros of orders.

Spanish 10-year bonds yield 0.58%, compared to 0.12% in France and 2.39% in Italy. Italian bond futures fell Tuesday after news that Europe’s most indebted nation looked set for a sale of bonds maturing in 2040.

The nation hired Morgan Stanley, Monte dei Paschi di Siena SpA, NatWest Markets, Nomura Holdings Inc. and Societe Generale SA for the sale, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified. It will be Italy’s third syndicated euro offering this year following an 8 billion euros sale in February and 10 billion euros offering in January, data compiled by Bloomberg show.

To contact the reporters on this story: James Hirai in London at jhirai3@bloomberg.net;John Glover in London at johnglover@bloomberg.net

To contact the editors responsible for this story: Hannah Benjamin at hbenjamin1@bloomberg.net, ;Ven Ram at vram1@bloomberg.net, Neil Chatterjee, Scott Hamilton

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