Italian Sovereign

Public sector debt bankers and fellow debt management office heads have lined up to praise the impact on the Italian and wider European sovereign debt markets of Italy funding head Maria Cannata, who is retiring after nearly three decades at the country’s Treasury. While universally agreeing that she would be greatly missed both professionally and personally — including her sense of humour — there was also strong confidence that the team she has put in place will be able to meet all Italy’s future challenges.

Italian sovereign green bond issuance could be scuppered by risk monitoring difficulties arising from the regional complexities of the country.

Maria Cannata of the Italian Tesoro, one of the sovereign bond market’s best known and longest serving funding heads, is to retire, just after the new year.

The US Federal Reserve raised its target rate to 125bp-150bp this week in a move investors and analysts widely expected, but there was still a small rally in US Treasury yields as some of the central bank’s projections hinted at what analysts called a “Goldilocks scenario for bonds”. That is likely to be welcomed in the offices of one sovereign issuer, which is planning a return to the dollar market after a long absence.

Italy is planning to return to the dollar market in 2018 for the first time in years and could also make an appearance in yen further down the line.

Belgium will issue its first sovereign green bond in the first quarter of 2018. Several countries in southern Europe are investigating the option, but they are less likely to issue in the near future.

Rating: Baa2/BBB/BBB

The social bond market — though still nascent — is rapidly gaining momentum. Three public sector issuers made their debuts in the market this week, all of which met with enthusiastic approval from Europe’s community of dedicated socially responsible investors.

Three issuers launched social bonds on the same day on Tuesday, which is likely a first for the SSA market. They raised a combined €1.5bn across five, seven and 10 years, with two of the deals managing to make dramatic moves in pricing thanks to what one banker called "superb conditions".

The buy-side is slowly removing European duration from portfolios in anticipation of the European Central Bank cutting its asset purchase programme, according to an investment director. Meanwhile, new cash flowing into the eurozone periphery is likely to go to Italy over Spain while uncertainty lingers over Catalonia’s future.

Eurex, the derivatives exchange of Deutsche Börse, will start offering BTP options on October 2.

The European Central Bank’s asset purchase programme is forcing down the yield on Italian debt, prompting Italian bank investors to reduce exposure to their sovereign’s paper.