Exclusive: Italy eyes return to ultra-long debt market
Italy could issue its first 30-year benchmark bond in more than three years in 2013 after successfully selling a new 15-year bond this week, the head of the Debt Management Office told Reuters on Wednesday.
Rome, which has 2 trillion euros of public debt to refinance, shied away from selling longer-dated paper during the worst of the euro zone debt crisis, which pushed yields on its bonds and its borrowing costs higher across the curve.
That in turn has shortened the average maturity of its massive debt pile, a trend the treasury is now seeking to reverse by venturing back into ultra-long territory. Italian yields have tumbled since the European Central Bank pledged in September to buy bonds of struggling euro zone states if they ask for aid.
"After the success of the 15-year sale, we plan to issue a new 30-year bond when the time is right on the markets," Maria Cannata told Reuters in emailed comments.
She did not give a precise timeframe. Rome last sold a 30-year benchmark issue in September 2009.
On Tuesday, Rome sold 6 billion euros of its first 15-year benchmark bond in more than two years, bringing the total amount it has raised since the start of the year to nearly 10 percent of its 2013 funding needs.
Cannata said foreign investors, who dumped Italian debt at the height of the crisis, bought 60 percent of the new 15-year bond. In details, British investors bought 29 percent of the issue, Germans 9 percent, and U.S. accounts 6 percent.
Foreign holdings of Italian debt fell last year to a trough of 35 percent from 51 percent in mid-2010.
Analysts say Italy is exploiting a rally in bonds to front-load its hefty 2013 funding needs ahead of a general election next month which could raise fears of political instability and fuel market volatility.
But Cannata said the treasury had no specific strategy linked to the February 24-25 vote, which investors have so far taken in their stride.
"Market sentiment for Italian bonds is pretty favorable at the moment and the treasury grabbed a window of opportunity with the new 15-year," she said.
Some 30 percent of the issue was snapped up by pension funds, central banks, insurers and government agencies, institutional investors that are considered safer by the treasury because they usually hold debt to maturity. Banks bought an additional 26 percent, and hedge funds 8 percent.
Italian bond yields have significantly decreased in the past three weeks, pushed down by demand from investors chasing returns. Market sentiment towards weaker euro zone countries has shifted since the ECB's pledge to buy their debt if needed.
Italy paid a yield of 4.8 percent for the new 15-year bond, far less than the 7.1 percent charged by investors for a bond of the same maturity last July. Germany, the euro zone's strongest credit, pays around 2 percent to borrow over 15 years.
Italy had already raised 34 billion euros via two auctions settled this year. The country needs to borrow an estimated 420 billion euros in 2013.
(Editing by Silvia Aloisi and Catherine Evans)