Italy Inflation-Linked Bond Tops $9 Billion on First Day

Investors ordered more than 6.72 billion euros ($9.3 billion) of an Italian six-year, inflation-linked bond known as BTP Italy, just five months after the record sale of a similar maturity.

The amount was sold on the first day of an offer running through April 17, the Italian stock exchange said on its website.

The sale aimed at retail investors comes after the Rome-based Treasury last week managed to sell one-year and three-year debt at record lows. It’s the sixth issuance since 2012, when the Treasury began reaching out to Italians to help manage its public debt as contagion from the debt crisis triggered an exodus of foreign investors.

“I expect a maximum amount of about 10 billion euros,” from this week’s sale that the government could use to repay state arrears to companies, Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London, said by telephone. The Treasury has said it doesn’t have a target for the sale.

Record Sale

Italy has raised more than 66 billion euros in the previous five sales. The amount includes a record 22.3 billion-euro two-day sale in November, the single biggest by a European government.

The inflation-linked bond, which carries a minimum guaranteed annual coupon of 1.65 percent, has a maturity of six years, while previous issuances had a four-year maturity. The Rome-based Treasury has said the change is in line with its strategy to slow down the decline in the average life of debt.

Italy has decided to cap demand for the bond, by dividing it in two stages and introducing more early-closure options. The first part of the sale, from April 14 to April 16, will be reserved to retail investors, while April 17 will be reserved to institutional.

The Treasury has probably tried “to give more space to retail investors since in the previous issuances institutional had taken more than expected considering the nature of the product,” Ziglio said.

Chance to Close

The Treasury will have its first chance to close the retail placement tomorrow, provided it communicates its intention by 1 p.m. local time. On April 17, it will have the possibility to close the institutional sale before the end of the day by communicating it just 30 minutes earlier.

The Treasury has raised its 2014 gross funding target by 20 billion euros to 470 billion euros after Italian Premier Matteo Renzi pledged to repay more arrears to companies, a press officer who asked not be named for internal policy said last week.

Italy’s public debt grew to 2.11 trillion euros as of February, the nation’s central bank said today.

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