Italy to issue more foreign currency bonds next year

Italy plans to sell more debt denominated in foreign currencies next year after demand for its first US dollar bond in nearly a decade exceeded expectations, the head of debt management at the Treasury said.

Italy's first US dollar bond since 2010 drew more than $18 billion in orders this week, allowing the Treasury to raise $7 billion and helping to diversify funding sources for the heavily indebted state.

Davide Iacovoni told Reuters in an interview the Treasury aimed to sell more global bonds in US dollars next year and privately place debt denominated in yen and other non-euro currencies. "Our goal is to be present on the US dollar market on a regular basis and we'd like to resume our global bond programme. We expect to be able to tap this market again with new issues next year," he said.

This week's 10-year dollar bond yielded 2.98%, but Iacovoni said that if it were priced in euros the yield would be broadly in line with the current yield on Italy's benchmark 10-year BTP bonds.

Italy has already met more than 80% of its 2019 funding goal of 240 billion euros ($264 billion) for medium and long-term bonds, the debt management chief said. He added that before the end of the year the Treasury would issue a new BTP Italia bond linked to Italy's inflation rate and aimed at retail investors. The bond will have an 8-year maturity, compared with the 4-year maturity on the previous retail bond issued in November last year. It will be issued over three days, two of which will be dedicated to retail investors and one for institutions. The coupon will be set after the retail part of the sale "to give certainty to the institutional investors," Iacovoni said.

The treasury said in a later statement the new BTP Italia bond would be issued on Oct. 21-23. Italy cancelled its usual spring issuance of this type of bond due to fears of weak demand, but since then yields on Italian bonds have plunged thanks to the arrival of a new, more pro-European government and the European Central Bank's plans for more monetary stimulus.