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(Bloomberg) — Italy’s sale of new 30-year debt attracted over €130 billion ($143 billion) of orders as investors rushed to lock in the region’s highest yields before an expected interest-rate cut by the European Central Bank later this week.
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The country’s Treasury is selling €8 billion of a bond maturing in October 2054, with pricing set at a spread of 13 basis points over comparable debt. The order book exceeds the previous record set in the immediate aftermath of the pandemic in 2020 when the European Central Bank was actively buying bonds to support the economy.
Italian yields have fallen in recent months as the ECB starts a rate-cutting cycle, with policymakers expected to lower the deposit rate by another quarter-point to 3.5% on Thursday. Money markets are betting a further six such reductions will follow by the end of next year as inflation hovers close to the central bank’s mandate of 2%.
The sale emerged on a hectic day for debt sales in Europe where at least €21 billion is expected to be raised by a wide cast of borrowers ranging from Austria’s Bawag Group AG to France’s Electricite de France SA.
What Bloomberg Strategists Say…
“Italy just saw a record €130 billion demand for a 30-year bond sale. That’s conceivably a knock-on effect from France’s political and economic troubles. The spread between Italian and French yields is back to ~70 bps, and the lowest it’s been since before the euro-zone debt crisis.
—Simon White, MLIV strategist
The orderbook size for Italy’s bond as well as the €70 billion-plus of demand for a €5 billion increase of a European Union 2050 deal shows that investors are still happy to buy longer-dated debt, even after Austria dropped a plan to tap a 2086 bond last month.
September is typically a busy month for issuance across the globe. In the case of the US, the pace has been particularly frenetic this year with issuers taking advantage of favorable funding conditions in credit markets ahead of the Federal Reserve’s rate decision next Wednesday.
In Europe, September’s issuance is expected to reach about €93 billion on Tuesday, taking the year’s total to around €1.4 trillion, 15% ahead of 2023, according to data compiled by Bloomberg.
Bookrunners on the new Italian bond deal are Barclays Plc, Bank of America Corp., BNP Paribas SA, Citigroup Inc. and Societe Generale SA.
–With assistance from Colin Keatinge and Hannah Benjamin-Cook.
(Updates with details on September’s bond sales. A previous version corrected MLIV quote to accurately reflect Italian yield.)
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