In the opening days of 2024, Italy experienced robust investor demand, nearly 10 times the targeted €15 billion ($16.41 billion), in a debt sale signaling optimism for Rome amid anticipated challenges in the coming year. The planned issuance involved €10 billion from a new seven-year bond and €5 billion from reopening an existing 30-year bond. The final demand surpassed expectations, reaching over €66 billion and €81 billion, respectively, reflecting a positive sentiment among traders. Jens Peter Sorensen, Chief Analyst at Danske Bank, deemed the deal a "very good signal" for Italian funding in 2024, attributing the high demand to expectations of significant European Central Bank interest rate cuts. While January government bond sales typically attract attention, this year's demand far exceeded the previous year's figures. Notably, a similar debt sale in the prior year saw €26.5 billion in orders for a €7 billion issuance. Sorensen highlighted increased confidence in the central bank's stance, emphasizing that the question is not whether rate cuts will occur but rather how many and when. Belgium also experienced positive market dynamics, witnessing over €72 billion in demand for a €7 billion bond on Tuesday, reinforcing the trend of absorbing substantial funding across developed economies.
The bond due Feb. 15, 2031, is set to yield 6 basis points over an outstanding November 2030 bond, down from the initial 8 bps. Meanwhile, the reopening for the Oct. 1, 2053 bond is expected to yield 21 bps over Italy's outstanding September 2052 bond, a decrease from the initial 23 bps. Italy's significant €2.4 trillion debt, a potential vulnerability for the Eurozone's stability, has been a longstanding concern. Despite worries over ECB policy and Rome's financial situation, Italian bonds outperformed major markets in the past year. Moody's outlook upgrade played a crucial role in alleviating fears of a downgrade to junk status, reinforcing confidence in the sustainability of Italy's substantial debt.
