Italian Sovereign
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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.
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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.
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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.
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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.
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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.
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It was all going so well for Italy. Its entry to the 50 year bond club on Tuesday pulled in a monstrous €18.5bn of orders. But almost immediately the bond became tradeable, the market frothed with talk of the European Central Bank tapering QE, sending Eurozone periphery bonds into a tailspin to remind everyone just how much markets are in the grip of central bank policy. Lewis McLellan reports.
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It was shaping up to be a healthy week for euro issuance in the SSA market until a rumour about the European Central Bank planning to “taper off” its asset purchase programme ruined the vibe.
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Italy joined the ultra-long borrower club on Tuesday, attracting more than €18.5bn of demand for its first ever 50 year syndication.
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Italy announced on Monday the banks to lead its first ever 50 year syndication, a bond planned since May.
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Worries over an upcoming Italian constitutional referendum have driven a wedge between Italy and Spain’s sovereign bond curve, which is at a level not seen since January 2015, according to Société Générale.
