Italy is feeding investors seeking coupon income in Europe
This week’s auction results are offering an important takeaway: the market will do anything for anything to get coupon income.
The new 50-year BTPS benchmark has offered that much-needed coupon income. On Wednesday, we saw order books swelling with €64 billion bids, the highest we have seen for long-term government bonds this week. Demand has been extraordinarily high because Italy issued the new bonds offering a yield of 2.15%, one of the highest in the European sovereign space.
At the same time, Italian government bonds have proved remarkably resilient amid the recent selloff in European sovereigns, falling only by 1%. In comparison, peers registered an average loss of 2%. Such resilience can be attributed to the fact that Italian sovereigns carry shorter duration, and that sentiment has improved since Mario Draghi entered in the political landscape.