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Opinion
Marcus Ashworth

There's No Easing Into the New Year for the ECB

A flood of new sovereign bond issues this week means the central bank must soak up any slack now or risk losing control of the market.

Mind the gap: Draghi with Olaf Scholz, Germany's chancellor, in Rome on Dec. 21.

Mind the gap: Draghi with Olaf Scholz, Germany's chancellor, in Rome on Dec. 21.

Photographer: Fabio Cimaglia/IPP

Italy is out of the traps fast in 2022 with a new 30-year syndicated bond. It's a bold move as European yields have increased substantially in recent weeks in conjunction with the selloff in U.S. Treasuries. Investor appetite is still strong with over 43 billion euros ($49 billion) of orders for what is an expected 7 billion euro issue — priced attractively at just over 2.1%. That’s 30 basis points in extra yield since mid-December.

For Italy, it still makes sense to raise large clips of money via long duration bonds now to get ahead of its annual funding schedule. That’s because the European Central Bank will terminate its 1.85 trillion-euro Pandemic QE bond-buying program, known as the PEPP, at the end of this quarter. Slovenia is also in the market with four- and 40-year tranches. The supply schedule is likely to be rapidly filled by other European nations and the European Union itself which is likely to issue around 100 billion euros this year to fund its NextGeneration recovery program.