By Silvia Marchetti
ROME (MaceNews) – Italy aims to issue more USD-denominated bonds with new and potentially “unconventional” maturities this year as it seeks to become a “frequent issuer” and turn the U.S. operation into the cornerstone of its global issuance program, according to ruling coalition sources.
“Our recent U.S. denominated bonds placement registered a significant success, proving that our strategy to return to the U.S. market after years of absence has been successful. The goal now is to consolidate our presence and become a frequent issuer”, said one official.
The objective is two-fold: diversify and strengthen the investor base through foreign currency issuances and complete the yield curve in US dollars so it is parallel to the issuance curve in euros.
Sources noted that Italy will continue to issue securities in other currencies this year, both in the Global and EMTN (Euro Medium Term Notes) format, but the dollar operation has taken on a central role of ‘protagonist’ in guiding the debt issuance strategy.
In order to complete the yield curve in USD and cover as many segments as possible Italy will likely be focusing on the issuance of new maturities “to fill in the gaps between the maturities already issued also through unconventional and non-standard segments”, said another source.
In 2019 Rome made a historical comeback on the U.S. financial market after niine years of absence, raising $7 billion through the placement of 5, 10, 30 years U.S. dollar denominated. A second operation took place at the end of last year when a new 5-year U.S. denominated bond maturing in February 2026 was placed on the market, raising $3 billion and thus increasing the amount of outstanding securities in USD to $15.5 billion.
“We want to diversify maturities to increase the variety and the offer of U.S.-denominated bonds to lure new investors with a wider choice and make the yield curve as liquid as possible, meaning not just focusing on our benchmark maturities but also on unconventional, non-standard ones”, said one source.
“It is key that U.S. investors perceive Italy as a frequent and not occasional issuer, that they expect us to regularly issue new U.S.-denominated bonds. Our operations in dollars must be considered as predictable, no longer exceptions or one-offs related to particular circumstances”.
Italy’s traditional securities maturities are 3, 5, 7, 10, 20, 30 years but for the dollar operations it is likely that the next issuances might also take into account maturities in between these segments, with sources noting that extra bonds with the same maturities of those already issues would not be placed again.
“If we diversify issuances along the curve and boost liquidity across all segments we can strike a good balance between different available maturities and yields, thereby also mitigating currency exchange risk”, said a source.
Italy will continue to carry-out multiple and stable issuances of U.S.-denominated bonds in the long-term perspective, with the goal of creating a ‘permanent’ presence on the U.S. market, said sources. The exact timing, size and maturity of the next issuance, and whether it will be single or multi-tranche, is yet to be determined and will be based on market evolution analysis.
“We’re a bit too early in the year to say when the next issuance will be, but the recent operations have been going smoothly and we’re very satisfied, particularly given that Italy returned to a foreign market after a decade of absence and had to go through all the necessary procedures and authorizations to operate on U.S. soil. So far the alignment of the required paperwork with the U.S. Security and Exchange Commission (SEC) has been successful and raises confidence that it will continue to be so”, said the source.
Rome will be constantly monitoring the U.S. market to vet when to launch the next operation and the potential placement of new and unconventional maturities, which being a “novelty” will require a bit more “attention and in-depth evaluation” than the ordinary segments, noted the officials.
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Contact this reporter: silvia@macenews.com
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