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Italy and Portugal unleash a wave of bond sales to lock in rates
debt

Italy and Portugal unleash a wave of bond sales to lock in rates

07.04.2021
Speculation is growing that Italy could even issue 100-year debt to help finance the recovery from the coronavirus
Mario Draghi has been asked to lead Italy out of its current crisis
Mario Draghi has been asked to lead Italy out of its current crisis
Photo credit: Shutterstock

Two of Europe's most indebted nations are gearing up to test investor appetite for their bonds as an economic recovery begins to lift yields from historically low levels.

Italy is due to offer its first new 50-year bond in almost five years via banks on Wednesday.

It's also set to sell debt maturing in 2028, while Portugal is expected to come to market with a 10-year security, according to people familiar with the matter.

The sales come as investor appetite for government debt shows signs of waning, with investors pricing an end to the pandemic as vaccine rollouts gather steam across the continent. 

On Tuesday, the region's benchmark stock index rose to a record, a sign that traders are rotating out of sovereign bonds and into riskier assets.

Yet demand for peripheral euro-area debt may be strong regardless, given that the European Central Bank has committed to accelerate its bond purchases this month to prevent an unwarranted tightening in financial conditions.

"The ECB scales up quantitative easing in Q2 and what do the issuers do? Start printing like madmen," said Jens Peter Sorensen, chief analyst at Danske Bank A/S.

Speculation is growing that Italy could even issue 100-year debt to help finance the recovery from the coronavirus. 

Its longest-dated bond is a 50-year security issued in 2016, which currently yields around 2%. That's the highest level since September, but still low by historical standards.

For Portugal, the bond sale is also symbolic, coming nearly a decade after it first asked the International Monetary Fund for a bailout package. 

Its 10-year yield is now at just 0.24%, compared with over 18% at the height of the sovereign debt crisis.

©2021 Bloomberg L.P.