Italy unlikely to tap retail investors before summer amid EU vote uncertainty - sources


By Elvira Pollina and Sara Rossi

MILAN, May 24 (Reuters) - Italy will likely axe its customary spring sale of BTP Italia retail bonds, four sources close to the matter said, to avoid a repeat of last November's flop when Italians were scared off by Rome's spending plans and a clash with Brussels.

It would be the first time since BTP Italia bonds debuted in 2012 that Treasury does not offer an issue in the spring.

Italian government bond yields are close to their highest level since February amid investor concerns that European elections on Sunday may lead to a break up of the anti-establishment government, triggering political uncertainty.

Budget tensions are also unsettling investors again, after calls by the coalition for an overhaul of EU fiscal rules.

One of the ruling parties, the right-wing League, has said Italy should push the deficit above the EU's 3 percent of gross domestic product ceiling if necessary to create jobs.

"There's very meagre appetite for a new BTP Italia at the moment, I would not expect any offer over the next few weeks," one of the sources said.

In its annual debt guidelines, the Treasury committed to offering at least one BTP Italia this year.

Rome introduced the BTP Italia bonds at the height of the euro zone debt crisis to tap large private wealth at home in the face of scant foreign demand for its debt. In a record sale in 2013 the Treasury pocketed 22.3 billion euros.

Should market sentiment improve after the EU vote, there would still be a chance for the Treasury to sell to retail investors at the end of June or in early July, although the chances would be very limited, another source added.

The Treasury declined to comment.

Tailored for retail buyers but also drawing strong interest from professionals, the BTP Italia bonds offer a premium over the national inflation rate and an extra incentive to hold the notes to maturity.

Since 2016 Italy has tapped retail bond markets every year with a BTP Italia sale in the spring and the autumn.

In its last BTP Italia offer, at the height of the showdown with the European Commission, Italy sold just 863 million euros of a four-year BTP Italia to retail buyers and 1.3 billion euros to institutionals.

That was the second poorest result since it introduced the retail bond in 2012.

(Reporting by Elvira Pollina and Sara Rossi, editing by Gavin Jones)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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