Italian Bond Yields Jump After Rome Confirms It Will Issue 50 Year Bonds

What emerged one month ago as a rumor that Italy was contemplating the issuance of half-century, or 50 year, bonds amid a “global search for yield” was confirmed earlier today, when Italy’s Treasury announced that Italy had hired Banca IMI, Goldman, HSBC, JPM and Unicredit as joint lead underwriters of this anticipated issue. “The new bond will “be launched in the near future subject to market conditions” with a structure similar to regularly issued BTPs, the Treasury said.

Once priced, Italy will become the latest nation to issue super-long bonds this year, following sovereigns including Belgium, France, Ireland and Spain in taking advantage of the historically low interest rates spurred by central bank stimulus. Italy’s Treasury announced the issuance “after a thorough market analysis,” it said in a statement on Monday, Bloomberg reported earlier.

The bond sale announcement comes “at a delicate time because of the political backdrop” in Italy, said Orlando Green, a rates strategist at Credit Agricole SA’s corporate- and investment-banking business in London. “It does potentially weigh on BTPs in the near term,” he said, referring to Italian bonds.

The general terms :

• Republic of Italy is rated Baa2/BBB-/BBB+
• Maturity: March 1, 2067
• To launch in near future, subject to market conditions
• All other specialists to be invited as co-lead managers
• Reg S/144a

The announcement will not exactly come as a surprise due to the abovementioned market trial balloons, however with confirmation that the issue is imminent, focus now turns to size. Here Bloomberg notes that Italy sold €6.5 BN of 20Y notes when it came to market in April, and €9b of 30Y bonds in February. Barclays expects a smaller issue, writing in August that it sees €4b as most realistic.