Italian Sovereign

Italy is set to kick off its syndicated programme for the year with a September 2033 euro benchmark, as the sovereign brushed off a downgrade from DBRS late last week.

Portugal found the best possible medicine to a rising fever in its bond yields by building a large order book on Wednesday for its first syndication of 2017. Attention now turns to Italy, which faces a crucial rating review by DBRS on Friday.

Italy’s new prime minister Paolo Gentiloni has the opportunity to provide a strong boost to Italian bonds if he acts swiftly, according to Pioneer Investments.

Italy and the wider eurozone periphery this week rode out the latest vote against the political status quo of 2016, as government bonds performed well despite the resignation of Italy’s prime minister Matteo Renzi after losing a constitutional reform referendum over the weekend.

The market was already expecting that the European Central Bank would announce an extension to quantitative easing — and be tight-lipped on tapering — at its next governing council meeting on Thursday. The resignation of Italy's prime minister Matteo Renzi following defeat in a constitutional referendum on Sunday now means the central bank has little choice but to offer some more easing.

The public sector bond market rode out the widely expected ‘no’ result of the Italian constitutional referendum on Sunday night, as bankers looked at a possible silver lining in the form of a more dovish European Central Bank meeting on Thursday.

Rumours of increased European Central Bank support have failed to take pressure off Italian sovereign credit default swaps, despite a rally on Tuesday, with the country resuming its widening divergence from European peers on Wednesday ahead of this weekend’s referendum.

The Italian referendum on December 4 has been lurking in SSA bankers' diaries as a dangerous risk event but, on Tuesday, rumours of enhanced European Central Bank support led to a rally in Italian government paper.

Italy’s bond yields hit their highest levels at auction since June 2015 at the country’s final bond sale before Sunday's constitutional reform referendum that could lead to the resignation of prime minister Matteo Renzi.

The Italian Treasury is on Tuesday set to hold its last bond auction before the country holds a referendum on constitutional reform that analysts believe could have an impact on eurozone periphery spreads into the new year.

Portugal’s bond yields fell to levels last seen in early September, as investor worries eased over a vital ratings review of the sovereign by DBRS this Friday.

Italy showed that not every investor’s fingers were burned by the sudden sell-off of its debut 50 year benchmark last week, as it printed its largest private placement in over 18 months on Monday.