Italy kicks off 2024 with huge demand for bond sale

By Antonella Cinelli and Yoruk Bahceli

ROME (Reuters) – Italy saw investor demand of nearly 10 times the 15 billion euros ($16.41 billion) it was set to raise in a debt sale on Tuesday, a positive signal for Rome going into a challenging year.

It was set to raise 10 billion euros from a new seven-year bond and 5 billion euros from the reopening of an outstanding 30-year bond later on Tuesday, with final demand of over 66 billion euros and 81 billion euros respectively, three lead managers said.

The deal is a “very good signal” for Italian funding this year, said Jens Peter Sorensen, chief analyst at Danske Bank, adding that high demand reflects trader expectations of hefty European Central Bank interest rate cuts this year.

Government bond sales in January are usually popular, but demand on Tuesday was much higher than a similar debt sale a year ago, when Rome saw 26.5 billion euros of orders for a 7- billion-euro issuance.

“We were not quite sure where the ECB was done at that time, but now you are very positive that the central bank is done and it’s just more a matter of how many rate cuts and when they come rather than if they actually will come,” Sorensen said.

Similarly, Belgium on Tuesday saw over 72 billion euros of demand for 7-billion-euro bond, according to a lead manager, in another positive sign as markets will continue having to absorb a high amount of funding across developed economies this year.

The bond due Feb. 15, 2031 will pay a yield of 6 basis points over an outstanding November 2030 bond, down from around 8 bps initially, leads said. The reopening for the Oct. 1, 2053 bond will pay a yield of 21 bps over Italy’s outstanding September 2052 bond, down from around 23 bps initially.

The sustainability of Italy’s huge 2.4 trillion-euro debt pile has long been seen as a potential weak link for the stability of the 20-nation currency bloc.

Despite concerns around the impact of ECB policy tightening and Rome’s finances, Italian bonds outperformed major bond markets last year.

They weathered a series of potentially risky credit rating reviews, with an outlook upgrade by Moody’s alleviating the threat of Italian debt being downgraded to junk.

(Reporting by Antonella Cinelli and Yoruk Bahceli, additional reporting by Sara Rossi, editing by Alvise Armellini and Susan Fenton)