Italian Sovereign

Spain’s five year and 10 year borrowing costs fell to their lowest levels since 2010 at an auction on Thursday morning, confirming that Italy’s political shenanigans are having little effect on the wider peripheral market.

The Republic of Italy passed the first test of its new political environment on Wednesday, placing its maximum target of €6.5bn at an auction that included the launch of a new 10 year line.

The Republic of Italy’s borrowing costs shot up at a bills auction on Tuesday as it became clear that Italy’s government elections would produce an inconclusive result, which caused peripheral government bond markets to spin wider. A bigger test of demand, however, will be on Wednesday when Italy will auction five and 10 year bonds.

Volatility reigned supreme on Monday as projections based on early voting results from the Republic of Italy’s general election played havoc with Italian bond yields.

The Republic of Italy found solid demand for its long dated debt at an auction on Wednesday, auguring well for an expected new 30 year syndication, according to analysts.

The Republic of Italy is expected to auction debt at heightened yields on Wednesday, but is unlikely to have a problem finding demand — mirroring an auction for the Kingdom of Spain last week, according to analysts.

Italian yields plunged across the maturity curve at auctions this week and other peripheral eurozone issuers are expected to record similar results in early February, analysts said on Wednesday.

The snow is falling in London but the chill over the eurozone periphery has lifted. Italy and Ireland have both returned with deals, a Spanish syndication could be imminent and there is even chatter of Portugal plotting a comeback.

The triumphant return of Italy to the syndicated market with a 15 year conventional bond and a successful bills auction by the Kingdom of Spain [see separate story] has given another massive boost of confidence to peripheral Europe, already buoyed by Ireland’s €2.5bn tap issued last week.

The Italian treasury has wasted no time in returning to the syndicated benchmark market this week by awarding four banks the mandate for a new bond, following a stellar opening week for SSAs. Meanwhile, the European Financial Stability Facility (EFSF) has also elected to return to the new issue market and other borrowers will not be far behind, say senior bankers.

The Republic of Italy rounded off a spectacular week for peripheral eurozone issuers with a yield-busting auction on Friday, but the sovereign was warned to get moving on a benchmark as the sustainability of the recovery was called into question.

Bankers have demanded that the Kingdom of Spain grasp the bull by the horns and launch a benchmark as soon as possible, as the sovereign basked in the glow of a spectacular auction result and a thumping tap by the Republic of Ireland on Tuesday.