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Italians rebuff government spending plan by shunning retail debt
Budget

Italians rebuff government spending plan by shunning retail debt

by Bloomberg 22.11.2018 From our online archive
Italy's domestic investors give resounding thumbs-down to the populist government's funding efforts
Inside the Italian parliament Photo: AFP
Inside the Italian parliament Photo: AFP

Italy's first offering of inflation-linked bonds targeted at the retail segment since the market turmoil in May garnered the lowest amount of orders for a BTP Italia issue since they were introduced in 2012.

The Treasury may still raise what analysts estimate would be around €5 billion, with the bulk of it coming on Thursday, the last day of the exercise that is open to only institutional investors.

There is a good deal of awareness of recent volatility among Italian savers

Giles Gale

The vote of no-confidence by local investors will be a worry for Italy's leaders as they look to borrow more money to finance their policy proposals.

The government has pencilled in a wider budget-deficit target of 2.4% of gross domestic product, putting it in conflict with the European Union's spending rules. The $2 trillion economy is the second-most indebted in the euro area.

"The spread is in the Italian press daily, so there is a good deal of awareness of recent volatility among Italian savers," said Giles Gale, an interest rates strategy at NatWest Markets. "Their support is important symbolically".

The European Union took the first step toward imposing fines on the bloc’s fourth-largest economy Wednesday after stating the coalition administration’s spending plans violate the bloc's rules.

Retail investors' orders for the BTP Italia bond totalled €864 million at the end of the third day of the sale.

That compares with the previous low of €974 million in 2012, and a high of €17 billion in 2013.

Italian 10-year yields have surged almost 150 basis points this year to 3.48%, with a much-watched spread over comparable German bunds having more than doubled to 312 basis points.

BTP Italia securities are typically sold once every six months.

Read also: EU escalates clash with Italy's populists, who risk budget fines