(July 7): Italy is returning to the US dollar bond market for the first time since the pandemic, broadening its pool of foreign investors after the country’s improving finances won credit-rating upgrades.
The euro area’s third-largest economy is looking to raise US$6 billion from a three-part dollar transaction comprising five-, 10- and 30-year benchmark bonds, according to information from a person familiar with the matter who asked not to be identified. The deal is expected to be priced later Tuesday.
The deal attracted almost US$20 billion of investor demand, with the two shorter tranches getting most bids, the person said. That enabled the pricing to be tightened by as much as 10 basis points across the different maturities, they said.
Once viewed as one of Europe’s riskiest major sovereign borrowers because of chronic fiscal slippage and political instability, Italy has enjoyed a sharp improvement in investor confidence since Prime Minister Giorgia Meloni took office in 2022.
The spread between Italy’s benchmark 10-year bonds and German bunds has narrowed to about 77 basis points from roughly 250 basis points when Meloni came to power.
While Italy sold euro-denominated debt through banks as recently as June, the government is opting for a dollar sale in order to widen its pool of institutional investors, according to Finance Ministry officials familiar with the government plans, who asked not to be identified because they’re not authorised to speak publicly. The relative cost of servicing debt in the US currency has also become more affordable, they said.
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The sale marks Italy’s first dollar outing since 2021, a period when governments worldwide were seizing on ultra-low interest rates to fund emergency stimulus programmes to counter the economic pain of the pandemic.
Italy is planning to issue between €350 billion and €365 billion of medium- and long-term government securities in 2026, broadly unchanged from last year, according to the nation’s Treasury.
The country last raised euro debt via syndication in June, tapping two of its outstanding notes for €18 billion, with investors placing around €238 billion of bids for the bonds.
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Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc and Morgan Stanley are managing the dollar-bond sale. They’re expected to be rated Baa2 by Moody’s Ratings and BBB+ by S&P Global Ratings and Fitch Ratings.
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