Monte dei Paschi

Bonds sold by Banca Monte dei Paschi di Siena were surging higher in secondary market trading this week, amid reports that the Italian bank was close to agreeing plans to offload a €10bn portfolio of non-performing loans.

The cost of insuring against default on Italian bank bonds has fallen to its lowest point in over a year, after investors embraced the result of recent regional elections in the country.

Banca Monte dei Paschi di Siena wrapped up its second deal of the month on Tuesday, capping off a busy period for Italian deal flow in advance of important regional elections.

Banca Monte dei Paschi di Siena was marketing a new senior bond in the euro market on Tuesday, a matter of days after it completed its capital raising plan with a tier two sold at 8%.

Italian banks took over the financial institutions bond market this week, enjoying a much lower cost of funding and capital than they have been accustomed to in recent years. The sector will look to make good use of favourable issuance windows in 2020, as it moves inch by inch towards a more positive outlook.

The stars have aligned for Banca Monte dei Paschi di Siena following its rescue by the Italian state. It is hard to see how other banks could be so fortunate.

Banca Monte dei Paschi di Siena was more than two times subscribed for a €400m tier two on Wednesday, as the state-backed Italian lender used strong market conditions to finally complete the last leg of its capital raising plan.

The only thing missing from a stellar start to 2020 is a capital transaction from Italy’s Banca Monte dei Paschi di Siena.

The Bank of Italy will require Banca Monte dei Paschi di Siena to maintain higher capital buffers from next year, after finding that it has become more complex and interconnected within the financial system.

Italian banks have made the most of improving market conditions in 2019, with the average cost of five year senior debt having fallen by 40bp in the last six months, according to Bank of Italy data.

A Banca Monte Dei Paschi di Siena (MPS) €1bn seven year issued on Tuesday was the most oversubscribed covered bond of its size issued this year and, with 300 investor orders, attracted the most granular order book of the year by a wide margin.

Banca Monte dei Paschi di Siena is getting ready to sell a new seven year covered bond in euros, in what will be its fifth deal in the currency so far this year.