Italian Sovereign

Portugal’s bond yields dropped in secondaries on Monday, along with most other eurozone periphery countries, after the Bank of Portugal’s decision over the weekend to split Banco Espírito Santo into a good bank — which will receive an injection of public funds — and a bad bank. While Portugal has no scheduled debt sales until a bill auction on August 20, Spain and Greece are both in action this week — and bankers are also predicting syndications for the periphery in a few weeks.

Italy hit new lows in its borrowing costs for the third auction in a row this week on Wednesday, but the sovereign — along with Greece — could be more at risk to fallout from the latest European Union sanctions imposed on Russia than the rest of the eurozone periphery.

Italy looks on course to auction 10 year debt in euros at its lowest ever yield on Wednesday, just a day after it broke its six month yield record. But with prime minister Matteo Renzi struggling to feed some of his latest reforms through his country’s treacly political system, the buy side might lose its appetite for BTPs, analysts warned on Tuesday.

Italy, which on Monday hit a euro-era low on an auction of two year paper — the fifth time it has done so this year — can expect to enjoy further yield declines in the coming weeks, say analysts.

A strong cash position has allowed Italy to cancel a pair of auctions in August — but with the country managing an outstanding debt pile of around €1.8tr there will still be lots of opportunities for investors to grab hold of the issuer’s paper over the next month.

This week's scorecard covers the funding progress of sovereign issuers, with all of the eurozone periphery comfortably ahead in their programmes despite some recent wobbles in secondaries.

Italy shrugged off a weak trading week for the eurozone periphery by setting two euro-era records and selling its maximum target of paper at auction on Friday.

This week's scorecard covers the funding progress of sovereign issuers, with most issuers moving into the second half of their funding programmes. Next week's scorecard will deal with European supranationals and agencies.

Eurozone periphery spreads over Germany were stable on Monday afternoon as Italy prepared for a hefty week of auctioning across the curve. The sales come just after the sovereign reduced some of its 2015 funding pressure with an exchange offer on June 20.

Italy will attempt to reduce its 2015 funding requirement on Friday with an exchange offer a little over a week after Spain launched a similar operation.

Spain is set to become the first eurozone periphery sovereign to test benchmark demand since the European Central Bank brought a series of new dovish measures to the market last week. The sovereign mandated banks for a new benchmark amid strong auctions elsewhere in the periphery on Wednesday afternoon.

Eurozone periphery sovereigns are set to waste no time in taking advantage of a sharp tightening in their spreads in the wake of last week’s European Central Bank meeting, with a series of auctions in the pipeline over the next few days and Spain rumoured to be considering a new 10 year benchmark.