Italy Seizes on Plunge in Borrowing Costs to Issue More Bonds
Italy Seizes on Plunge in Borrowing Costs to Issue More Bonds
(Bloomberg) -- Italy became the latest to take advantage of a plunge in European bond yields to lock in lower borrowing costs.
The government will sell three- and seven-year bonds this week, after yields for both fell this month to the lowest since before the populist coalition came to power in June 2018. Rome’s Treasury has also mandated banks to sell more of an existing 50-year note.
Bond yields have dropped to record lows across Europe on expectations of further stimulus from the European Central Bank. While Italian bonds lagged the rally in the first half of the year, they have been the best performers this month after Rome avoided punishment from the European Commission over its budget deficit and as investors sought exposure to some of the highest yields still on offer in Europe.
“In a world where the outstanding pool of positively-yielding European government debt for fund managers to invest in is shrinking all the time, this is where the price goes,” said Kit Juckes, a strategist at Societe Generale SA. “I think yields are more likely to fall further than rise from here.”
Italy has mandated banks including Citigroup Inc, Goldman Sachs Group Inc. and UniCredit SpA for a bond maturing in 2067 with a coupon of 2.80%, according to a statement. Benchmark Italian 10-year yields climbed four basis points to 1.78% after the announcement, widening the spread to German bunds by five basis points.
Both Spain and France auctioned debt at record-low borrowing costs on Thursday. Investors are turning to peripheral euro-area bonds as the yields on German bunds have fallen below the European Central Bank’s deposit rate for the first time.
To contact the reporter on this story: Anooja Debnath in London at adebnath@bloomberg.net
To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee
©2019 Bloomberg L.P.