Demand for Italian BTPS remains solid. Are we going to see new ultras?
In the old continent, we saw Italy issuing 3-, 5- and 15-year BTPS this morning. Despite last week Draghi announced that the country would increase its debt by EUR 40 billion, demand for BTPS was solid with a bid-to-cover ratio slightly below the 5-year average. Additionally, the Italian Treasury issued almost double the amount of 15-year bonds it did in December, without hiccups.
The auction results strengthen our view that Italy continues to be in a position of strength and that the market could easily digest any issuance of Italian ultra-long debt beyond 50-years.
Although Italian government bond yields remain a couple of basis points higher on the day, BTPS are still Europe's best-performing government bonds. Today, 15-year BTPS yields rose to the highest level since October 2020, widening just 20 basis points since the beginning of the year. Comparatively, French 15-year bond yields rose 50 basis points year to date.
Positive sentiment in Italian government bonds can be explained by the entrance of Draghi in the country's politics and by the higher yield that they provide compared to peers.