Italy's Long Bonds Underperform as Nation Mulls 50-Year Sale

  • Debt head says low rates make sale `interesting' option
  • Five- 30-year yield spread reaches widest close since November

Italy’s longer-dated government bonds underperformed their shorter-maturity peers after the head of the nation’s debt office was reported to be considering selling 50-year securities.

The yield difference, or spread, between Italian five- and 30-year bonds reached the widest since November based on closing prices after Italian newspaper Corriere della Sera reported debt agency chief Maria Cannata as saying that potential demand for 50-year debt was being analyzed and it was an “interesting possibility given the current level of rates.”

If Italy does go through with the sale of ultra-long bonds, it will join Belgium and France, who last month sold 50-year debt to lock in low interest rates driven by the European Central Bank’s accommodative policy and asset-purchase program. The longest-dated conventional debt Italy auctioned previously was 30-year bonds.

“You see some curve steepening” in Italian bonds, said Martin van Vliet, senior interest-rate strategist at ING Groep NV in Amsterdam. “We all know that France and Belgium had been looking at issuing 50-year debt for ages which they did. Now, because Italy is also contemplating a 50-year deal that is putting some pressure on the ultra back end.”

Italy’s five-year note yield fell two basis points, or 0.02 percentage point, to 0.35 percent as of 4:07 p.m. London time. The 0.65 percent security due in November 2020 rose 0.065, or 65 euro cents per 1,000-euro ($1,140) face amount, to 101.33. The nation’s 30-year bond yield was little changed at 2.68 percent.

That left the spread at 232 basis points, the widest on a closing basis since Nov. 11.

The yield on Italian 10-year bonds fell one basis point to 1.48 percent, while that on benchmark German bunds dropped one basis point to 0.13 percent, having reached 0.12 percent earlier, the lowest since April 18.

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