Italian Sovereign

Italy took advantage of a fall in its yields since a Brexit-induced spike late last week to print five year debt at a record low rate on Thursday, while Portugal announced plans for an exchange offer.

Spain’s 10 year bonds on Monday reversed all their Brexit driven losses, after the country’s voters showed a clear preference for pro-European Union parties at a general election on Sunday.

The UK may have knocked the eurozone periphery off a cliff as it stumbled on its way out of the European Union on Friday morning. Government bond spreads on Friday echoed those during the eurozone sovereign debt crisis. The gap between Germany and the periphery has opened up like the chasm that has developed between UK voters and the political establishment.

A vote for the UK to exit the European Union next week is likely to intensely magnify a strong rush into safe haven assets, but some bankers are still confident that after the initial furore of a ‘Brexit’ there could be room for issuers eyeing euro deals in July to go ahead. And, if the UK opts to stay in the EU, issuers are likely to be lining up to print in July.

Italy sold a super rare short-dated syndication this week, but a debut 50 year benchmark — a growing trend for sovereigns this year — looks to be some way off.

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Italy brought a rare syndicated effort at the short end of the euro curve on Wednesday, but there was little sign that the unorthodox approach disturbed investors as it built an oversubscribed book at a punchy price.

Public sector borrowers are taking advantage of some of the best conditions in the dollar market all year to print jumbo sized deals at the tightest spreads to US Treasuries in months.

Italy has confirmed it is considering a 50 year benchmark, a deal that would put it in an exclusive club of half century sovereign issuers. But while some bankers may suggest it wait to lock in even lower yields than its peer Spain achieved last week, the issuer would be wise to move before June.

Spain has nipped in ahead of its eurozone periphery peer Italy, mandating banks for a debut 50 year euro benchmark on the same day that the Community of Madrid had a strong showing at the short end and Greek yields rallied across the curve.

The Community of Madrid is preparing its first syndicated bond in a year, as the Republic of Italy considers following the lead of France and Belgium by publically issuing a 50 year bond.

Italy privately issued a long dated inflation linked bond and Spain drew strong demand at an auction of index linked paper this week, as bankers suggested interest could be returning to the asset class as investors bet on a return of inflation in the eurozone.