Halister News

(Bloomberg) -- The Italian Treasury will probably receive poor demand for any offering of 50-year bonds because yields are already very low and political uncertainty in the country is set to rise heading into the constitutional referendum in autumn, Natixis strategist Cyril Regnat writes in e-mailed comments.

• Long-end Italian yields are already very low and any demand from investors is going to decrease even if ECB announces a QE extension
• A good way to ensure a successful syndication would be to offer a very generous discount, but even this is probably not really worth the try
• Given the prospect of increased political uncertainty, it would probably be more convenient for Italy to keep issuing 30-year bonds ahead of the referendum
  • If Renzi gets a “Yes” vote, then the Treasury could try to launch a 50-year syndication
• A “No” vote at the referendum is not priced into market and may lead to a BTP spread widening
  • There would be a bear-steepening of the curve starting on 5-year tenor with the worst on 30-year
  • First target at 160bps on a “No” vote and with Renzi leaving
  • In event of snap elections and M5S winning, a level between 2% and 2.5% for the 10Y BTP wouldn’t be surprising with Spain about 50bps below, he adds
• NOTE: Italian Treasury sounding out investors on 50-year bond: WSJ
• NOTE: Goldman Sachs says a sharp BTP widening unlikely even on Italy referendum no vote