Italy breaks order book recordItaly secured record orders of €270bn for its dual-tranche deal on Wednesday in the clearest display yet of the effect that heightened yields are having on the SSA market. It was the biggest book ever for an overall transaction, according to IFR data. Euro SSA deals had already reaped the benefits of spiralling yields in the first few days of the year, with comfortably subscribed deals. But Italy's €18bn transaction – its biggest non-retail publicly syndicated offering – was the most striking display yet of just how much cash is chasing the attractive levels on offer. A €13bn 10-year tranche, which priced at a yield of 3.733%, got about €140bn of interest, the biggest book for any sovereign euro tranche, according to IFR data. Only the European Union has had more orders for a single tranche – €145bn in October 2020. Italy's €5bn no-grow 20-year green bond, which landed at 4.181%, got roughly €130bn of orders, which is the third biggest for a euro government bond tranche. “So far in 2025, we are already seeing a heightened level of demand across euro new issues and that’s in a year when the net cash supply in EGBs is the biggest it has ever been,” said Alex Barnes, head of global SSA syndicate at Citigroup, one of Italy's lead banks. Certainly, the primary market provides the best avenue for investors to deploy cash. "There's not that much paper out there and you've got all these good reasons to buy," said a second banker, referring to yields and spreads versus mid-swaps. "So it is pretty clear that you have to come to primary [to secure bonds]." A third banker said the deal "ticks all the boxes. There's a bit of duration, reasonable yield and relative [political] stability". That investors were chasing yield on Italy was self-evident, especially as the sovereign has underperformed versus core European governments, such as France and Germany, over the past month. The spread between 10-year OATs and 10-year BTPs is marginally wider than a month ago, at 33bp as opposed to 30bp. The underperformance versus Bunds is greater. On December 11, the spread between Germany and Italy was 106bp, according LSEG data, and as of Friday it was nearly 118bp. While Italy (Baa3/BBB/BBB/BBBH/BBB+) enjoys much greater political stability than either France or Germany at the moment, possibly giving the perception that it is currently a safer bet, the very issue that worried investors only a couple of years ago, the level of its public debt, is still pressing. Its gross public debt to GDP is forecast to grow to 142.1% by 2026, according to an IMF report in July, from 137.3% in 2023. France's debt levels are also forecast to worsen, but will still be better than Italy's, the IMF said. France's 2023 gross debt to GDP was 109.9% in 2023 and is projected to reach 113.5% by 2026. Tight is right Leads opened books on the 10-year tranche at 9bp area over BTPs, and the scale of the interest allowed Italy to tighten to plus 7bp. On the 20-year green note, leads tightened to plus 5bp from 8bp area over. Barnes said the 10-year offered buyers 2bp of new issue concession. He added that by Thursday morning, it was trading flat to the plus 5bp fair value estimate. “For a €13bn tranche, that’s a pretty impressive reaction and a vindication of the strength of the deal,” he said. Other bankers put the 10-year premium at 2bp–3bp. For the 20-year green bond, Barnes said it offered 1bp of premium versus Italy's conventional curve. He saw even more tightening for that line. "That bond has gone on to trade at flat to the reference BTP,” he said, meaning the bond was trading 4bp through fair value. At pricing, other bankers put the 20-year premium at zero to 1bp. Italy's mandate announcement on Tuesday had already led the 10-year point of its curve to widen by 4.5bp versus Bunds by the time books opened on Wednesday. Fast money Huge order books like Italy's, while he
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