Italy will sell a new 15-year benchmark bond for the first time in more than two years as the Treasury takes advantage of a plunge in borrowing costs to extend the life of the country’s debt.
The Rome-based Treasury will place the new benchmark security via banks “in the near future and in relation to market conditions,” according to an e-mailed statement today. The Treasury hired Banca IMI SpA, Barclays Bank Plc, Credit Agricole SA (ACA), Goldman Sachs Group Inc., JPMorgan Chase & Co. for the sale.
A surge in Italian borrowing costs pushed 10-year yields to more than 7 percent in 2011 and last year prompted the Treasury to curtail sales of debt longer than 10 years. European Central Bank President Mario Draghi’s pledge in July to do whatever it takes to defend the euro followed by the announcement of the ECB’s bond-buying program helped bring down borrowing costs. Italy’s 10-year yield has declined more than 230 basis points since Draghi first made his pledge on July 26.
Italian bonds due in 10 years or longer are the fourth-best performing government securities this year of 144 indexes of developed-markets tracked by Bloomberg.
Debt agency head Maria Cannata said in an October interview that the Treasury remains committed to boosting the average life of Italy’s debt and would sell bonds longer than 10 years when market conditions permitted. On Nov. 14, Italy auctioned a security with a maturity of more than 15 years for the first time since May 2011. The Treasury also sold 1.5 billion euros of debt due in 2026 in September of last year.
The average maturity of Italy’s debt was 6.58 years at the end of the third quarter, down from a peak of 7.2 years in 2010, according to Treasury’s data.
Separately, the Bank of Italy said today that the country’s debt rose in November to a record 2.021 trillion euros ($2.730 trillion) from 2.015 trillion euros last month. That amounts to almost 130 percent of the country’s gross domestic product, Europe’s second-biggest debt burden after Greece by that measure.
Italy will face fewer redemptions and financing needs will drop by 20 billion euros this year, Cannata said in the Nov. 12 interview. The Treasury faces 313 billion euros of maturing bonds and bills this year, according to Bloomberg data.
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