(Bloomberg) -- Italy attracted a record €200 billion ($216 billion) of orders for two new bonds it is selling through banks on Tuesday, as the Treasury capitalizes on last week’s outlook upgrade by Fitch Ratings.
Demand for the nation’s seven- and 30-year bonds is also the second highest for a dual-tranche sale in Europe, only beaten by an offering of European Union SURE bonds four years ago. The government is offering €10 billion in the shorter maturity and €3 billion in longer debt.
Investors are locking in Italy’s still elevated yields as the European Central Bank moves forward with its interest-rate cutting cycle. They have also been encouraged by Fitch’s decision to revise the outlook of the nation’s BBB sovereign rating to positive on Friday, citing “recent stronger fiscal performance and commitment to EU fiscal rules.”
The solid demand allowed the Treasury to pay less than initially expected for borrowing. The seven-year notes were priced with a spread of seven basis points over comparable notes, and the 30-year debt was set with a premium of nine basis points, according to a person familiar with the matter who asked not to be identified.
Italy had already attracted record demand for a 30-year bond sale in September, before the ECB cut rates for a second time. Policymakers have since followed up with another quarter-point reduction this month and money markets are betting on five more cuts by the end of 2025.
While debt syndications are typically more expensive than auctions, they allow governments to raise large sums quickly while diversifying their investor base. Bookrunners on Italy’s new deal are Deutsche Bank AG, Goldman Sachs Group Inc, IMI-Intesa Sanpaolo, JPMorgan Chase & Co, Morgan Stanley and Nomura Holdings Inc.
Italian bonds fell on Tuesday along with peers, with the yield on 10-year debt rising five basis points to 3.56%. The spread over safer German peers — a gauge of risk — was steady at 123 basis points after falling to a seven-month low at 117 basis points on Monday.
(Updates throughout with demand and pricing details.)
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