By Silvia Marchetti
ROME (MaceNews) – Italy will be reopening a 30-year maturity USD-denominated bond by issuing additional amounts, potentially as soon as the end of this week, according to ruling government coalition sources.
The goal is to replicate the success of the previous placement of a SEC-registered global bond denominated in US dollars with the same maturity issued in April, with a 3.875% coupon.
Italy’s government has mandated three global banks to lead manage a new fixed rate dollar issuance on the US market, with sources saying the actual launch is likely to be very soon but depends upon day-to-day market conditions and currency exchange rates.
“Once the banks are mandated with such task, then a global investors call, alongside one-to-one calls, will follow, and finally the operation will be closed with the effective issuance which is likely to take place over the next few days, potentially even by the end of this week,” said one official.
Another source noted how reopening an already existing maturity reflects a new strategy aimed at replicating previous results.
“We saw that there was great interest from investors for such long maturity. On the same day the 30-year tenor one was issued (in April), a 3-year US-denominated bond was simultaneously placed on the market but the longer-term one, with tenor 30 years, proved to be the most appealing and popular, with an overall demand of USD 6.2 billion. This has somewhat led us to focus our attention now where the demand is higher,” said an official.
In 2019 Rome made a historical comeback on the US financial market after a nine-year absence through the placement of 5, 10, 30 years US dollar denominated debt instruments. A second operation took place at the end of 2020 when a new 5-year US denominated bond maturing in February 2026 was placed on the market, then a third dual issuance occurred in April. The total amount in US-denominated bonds currently stands at about USD 25 billion.
In the April 30-year placement, 44% of investors were fund managers while 35% were insurance companies and pension funds, of whom 25% were located in Asia and 28% in Europe.
Another source noted how after so many years of absence from the US market, Italy’s comeback means “testing the ground” to see what the appetite is, and in which maturities it lies, with the goal of completing the yield curve and consolidating Italy’s role of “frequent issuer” by diversifying its investor base.
Sources argued that even though Italy remains focused on the issuance of new maturities to fill in the gaps between those already issued, it is “reasonable to reopen and increase the amount of maturities already on the market which have proven to be alluring.”
Increasing the amount of long-term maturities in US dollars has also a two-fold positive impact: it mitigates exchange rate risk for investors while raising Italy’s debt life span and boosting its sustainability, officials argued.
The SEC green lighted this upcoming reopening issuance earlier this month, sources said. The proceeds of the new issuances will be used according to government needs, including debt management.