Italy

Italy mandated banks for a new five year to be sold alongside a tap of a September 2050 bond on Monday as it prepares to bolt on a bigger funding programme in order to fund its effort against the coronavirus pandemic. The sovereign will be joined by Luxembourg in the euro public sector bond market on Tuesday.

Nexi, the Italian payments company, has sold a debut €500m convertible bond overnight with a simultaneous delta equity placement to circumvent the three month short-selling ban that has been imposed in Italy as a result of the Covid-19 pandemic, according to market sources.

The European Central Bank has been buying Italian government paper well above the pace indicated by the capital key, but has still struggled to keep the beleaguered sovereign’s spread to Bunds in check.

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Italian government bonds sold off sharply this week as worries grew over the sovereign’s debt sustainability after last week’s Eurogroup meeting left any form of debt mutualisation a highly unlikely prospect in the near term. The result is that Italy will have to rely more on support from the European Central Bank as it prepares to bolt on a much bigger borrowing programme in response to the coronavirus pandemic.

Bank of Italy officials said this week that the country’s most fragile financial institutions might struggle to cope with the economic impact of the coronavirus pandemic, raising the prospect of consolidation within the banking sector.

DCM officials have expressed surprise at the speed with which the market has adapted to working from home during the coronavirus pandemic, with issuers able to complete deals quickly and with little extra fuss.

Cassa Depositi e Prestiti pulled off a €1bn dual tranche Covid-19 response bond on Wednesday, capitalising on investors’ desire to deploy cash into coronavirus instruments to ride out a difficult market.

The Italian Treasury has updated the guidelines for its debt management strategy for 2020 as it comes to terms with additional financing needs from Covid-19. There are plans for more syndications, bigger auctions and more products for retail investors.

UniCredit has said that it will redeem €2.5bn of tier two capital next month, with regulators allowing banks to manage their debt capital stacks freely during the coronavirus crisis.

Italy is set to announce a new decree law that would allow banks to use public guarantees to cover 90%-100% of their lending.

Italy’s borrowing is set to increase as it attempts to weather the economic impact of coronavirus. But Davide Iacovoni, director general of the Italian public debt office, told GlobalCapital that he did not expect investors to abandon the country’s debt. He also called for some form of European risk sharing.