Italy Prepares to Tap Debt Market Just as Europe Demand Stutters

(Bloomberg) -- Italy may sell long-dated bonds this week just as investors are beginning to lose their appetite for such assets in the euro zone.

The Italian Treasury is set to sell 20- or 30-year debt on Sept. 12, Barclays PLC and Commerzbank AG forecast, even after France, Spain and Germany have all seen demand ebbing in recent weeks. Diminished expectations about outsized stimulus from the European Central Bank on the same day may also deter buyers, as Italy’s bonds get a boost from quantitative easing.

Investors are on guard for any signs the euro area’s bond rally may be coming to an end after the global pile of negative-yielding debt reached a record $17 trillion in August.

Germany’s auction of 30-year debt last month technically failed, leading its debt agency to admit the offering may have been too big. The oversubscription rate for similar French notes on Thursday matched a record low, and the rate at Spain’s sale of 50-year debt the same day fell to below a previous record.

More than 80% of economists surveyed by Bloomberg predict ECB officials will announce more quantitative easing this week, though some policy makers have pushed back.

Bank of France Governor Francois Villeroy de Galhau is among those expressing skepticism about the need for an immediate resumption of asset purchases. Christoph Rieger, head of rates strategy at Commerzbank, agreed, saying “the economic impact of new net asset purchases at these extreme yield levels is doubtful.”

Italy previously sold 1.25 billion euros of 20-year debt in March and 1.5 billion euros of 30-year notes in May. Its 30-year bond yield was up two basis points on Monday at 2.04%.

To contact the reporter on this story: James Hirai in London at jhirai3@bloomberg.net

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, William Shaw, Neil Chatterjee

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