SSAR Issuer: Italy
Riding the waves Italy deftly capitalised on credit tailwinds and the surging bid that emerged in 2024 for southern European sovereigns to post standout performances in the primary market while managing a huge funding programme. Italy is IFR’s SSAR Issuer of the Year.
Italy has a storied history in capital markets and not all of it pretty but 2024 proved to be its year. The sovereign drew huge interest across products and tenors and its funding team’s market savvy produced one stunning benchmark appearance after another.
Investors’ faith in Italy’s fiscal performance, reflected in a tightening of its spread over peers, provided the bedrock for those performances. It wasn’t that long ago that investors were fretting about an Italian debt crisis, but since the second quarter of 2022 its spread over Bunds at the 10-year point had tightened from about 250bp to 105bp by the end of 2024, according to LSEG data.
“Italy’s relatively stable political environment, robust investor base, and demand bolstered by the current macroeconomic landscape could set the stage for an unexpected alignment of yields [with Bunds] over the long term,” Althea Spinozzi, Saxo’s head of fixed-income strategy, wrote in a December note.
“The prospect of Italian BTP yields converging with German Bunds is remarkable – an idea that would have seemed unthinkable during the European sovereign debt crisis when Italy was labelled among the ‘PIGS’,” Spinozzi wrote. “Now, such a convergence feels within reach.”
Spinozzi said Italy’s strong domestic investor base has bolstered the sovereign’s performance, with those accounts holding around half the outstanding BTPs.
While Italy did not produce the same rate of growth in 2024 as that of Spain, Portugal and Greece, compared to its more stagnant, northern neighbours, it still managed to elicit a sunny performance. Italy did that while issuing considerably more than other southern European sovereigns. It printed more than €107.5bn in the public market in 2024, according to IFR data, including via its highly successful retail-orientated BTP Valore bonds.
Fitch analysts crystallised the positive sentiment around Italy in October when it upgraded the sovereign’s outlook to positive from stable. Fitch rates Italy at BBB, as does S&P, while Moody's has a Baa3 rating.
Italy appeared to make use of that good news. Less than a week after the Fitch move, it cleared a €13bn dual-tranche benchmark. Investors were keen for the exposure: they put in €200bn of orders across both tranches, a €10bn November 2031 bond and a €3bn no-grow tap of its October 2054s. A banker away from the deal called it “an outstanding success".
The issuer clearly possessed plenty of self-confidence even before Fitch’s move. The month before, Italy backed itself to the extent that it appeared with a benchmark on the same day as the European Union, a once unthinkable move in the euro SSA market. "I was surprised about [the EU and Italy coming the same day]," said a senior SSA banker away from the deal. "It looks like they have no self-doubt.”
He noted, however, that the spread differential between the two names made buying them very different propositions. Italy reaped more than €130bn of orders for its €8bn October 2054 bond by launch, a record for the issuer at the time.
The sovereign performed in ESG format, too, securing a record €84bn bid in May for its €9bn October 2037 green bond, leveraging a scarcity of shorter-dated green bonds to do so.
“Italy’s bond comes as there is scarcity in the green asset market, particularly in the five-year to long 10-year part of the curve," said Benjamin Moulle, SSA syndicate head at Credit Agricole, one of the deal’s bookrunners.
"Most of the green bonds from the EU and other EGBs are 15 years and longer," he said.
Long-end interest also provided an opportunity for Italy, one that it grabbed with both hands. A €5bn no-grow tap of its October 2053 line in early January attracted more than €80bn of orders. That deal was part of a dual-tranche offering that included a €10bn seven-year tranche.
Before the end of January, it raised another €10bn of long funding via an October 2039 bond that attracted €76bn-plus of demand.
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