Italy cashes in on improved market confidence to sell more 50-year debt

MILAN: Italy drew bids for more than 17 billion euros ($19 billion) on a 50-year bond, taking advantage of improved market sentiment after avoiding EU disciplinary action and of investor bets that euro zone monetary policy will remain dovish.

The final yield for the 3 billion-euro top-up of the 2.80% March 2067 BTP bond was set on Tuesday at 11 basis points over the 3.85% September 2049 BTP, below the initial guidance, according to Refinitiv's IFR service.

At 1050 GMT the September 2049 BTP traded at a 2.76%, giving the new issue a yield of 2.87%.

Last week, the Italian government persuaded the European Commission that deficit-cutting measures it had submitted would help bring its growing debt into line with EU fiscal rules.

Avoiding that clash with Brussels and expectations that the European Central Bank will retain its ultra-dovish stance under its incoming president, Christine Lagarde, have helped Italian government bond yields fall to their lowest since 2016.

The prospect of euro zone yields remaining below zero longer than thought has pushed investors towards longer maturities and issuers like Italy which offer higher returns, MPS Capital Services fixed-income strategist Filippo Mormando said.

"The Treasury was very clever in seizing a perfect market window," Mormando said. "The order book looks very solid for such an extra-long maturity."

Citigroup, Deutsche Bank, Goldman Sachs and UniCredit are managing the transaction via syndicate, the Treasury said on Monday. The final pricing of the deal is expected later on Tuesday.

Tuesday's sale is the second syndicated deal for Italy in less than a month, after Rome sold 6 billion euros of a new 20-year government bond in June, raising orders worth more than 23.5 billion euros.

Italian banks, including UBI Banca, Mediobanca and Banca Montepaschi, also took advantage of improved financial conditions this month to raise new debt.

Issued in October 2016, the 2067 bond was originally sized at 5 billion euros and has been increased twice at regular auctions, by 750 million euros in March 2017 and by 883 million euros in January 2018.