Monte dei Paschi
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The economies of Italy and China do not appear to have much in common. Italy’s government would welcome a GDP growth rate of 1%, while China expands at less than 7% and investors take flight. One is a sclerotic, decaying Western country, the other is a dynamic Asian tiger. Such is the conventional wisdom. -
Renewed concerns about Italian banks’ high levels of non-performing loans triggered a severe sell-off of their subordinated bonds this week, as the market enters the new bail-in era.
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Southern European lenders are back on the defensive as a European Central Bank inspection of non-performing loans drives a pronounced sell-off in equities and subordinated debt.
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The ECB can’t risk large disruptions in the European capital markets it is trying to support, nor paranoid doom spirals in the banks it supervises. So it needs care when and how it communicates with the market.
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The Italian subordinated debt market has come under further pressure this week, with spreads shooting wider amid renewed concerns about banks’ high levels of non-performing loans.
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Italian oil drilling company Saipem has revealed its bank group following the company's debut loan syndication.
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Monte dei Paschi di Siena (MPS) issued a €1bn 10 year Obbligazioni Bancarie Garantite (OBG) this week. The deal came with a 2.125% coupon, the highest of any covered bond sold this year.
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Covered bonds issued this week from banks in Italy and Portugal were a roaring success from the sellers’ point of view. But none could have been done without the European Central Bank’s help.
