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Capital Markets

Italian BTP auctions: helped by three-year LTRO?

Analysts say Italian BTP auctions netted slightly better than last month but were "not overwhelming"


Italy has sold €3.75 billion in 10-year bonds at a yield of 5.5%, down from 6.08% in January.


Marc Ostwald, financial markets strategist at Monument Securities, reflects other analysts' opinions when saying:



"Cover as ever not overwhelming but on net slightly better than in January, and
more importantly the full target volume of €6.25 billion was achieved.

"Key positive given the general lack of concession building (i.e. raising yields)
in the BTP curve as a whole ahead of today's sale were that the yields were
below market levels."



However, Ostwald says "it would be tenuous to argue that tomorrow's three-year LTRO gave a boost to the sale":

 



"As a general point, the BTP curve remains very steep, and thus offers Italian banks and fund managers very attractive carry. One wonders, when the central bank liquidity music stops, whether most government curves will have to be this steep. Equally, Italy and the eurozone are by no means out of the woods yet, so this is again a battle won in a long ongoing war."




To read more LTRO coverage from Euromoney, don't forget to check out the following:


Distressed corporate debt: The end of extend and pretend
Refinancing options are running out for many European companies with looming debt maturities. Could the banks’ own funding problems finally precipitate the distressed debt opportunity this market has been waiting for? Or are the consequences of asset disposals too brutal for many banks to take?

Euromoney February 2012

LTRO2: No bank safety in Draghi's massive numbers

Bankers predict the next round of ECB financing could top €1 trillion. But it will take more than an LTRO-induced liquidity injection to fix Europe’s banks

Published January 2012 euromoney.com

ECB: Two cheers for the three-year LTRO 
Will Europe’s leaders do enough to convince banks to finance its problem sovereigns through an ECB-led carry trade?

Euromoney January 2012

Funding: A Talf for Europe
ECB lets banks delever in orderly fashion; Bank bond issues might be scarce this year

Euromoney January 2012

Global finance: Running on empty 
“The LTRO is a lot more positive than we’d originally expected"

Euromoney January 2012

“Monumental” uptake of ECB LTRO but carry-trade impact unlikely
The €489.2 billion take-up of the ECB’s inaugural three-year LTRO on Wednesday underscores the significance of this new facility to the bank funding market in Europe

December 2011 euromoney.com

ECB's new LTRO threatens the covered bond market .

Banks may opt for cheaper long-term LTRO funding rather than secured issuance next year

December 2011 euromoney.com

Funding freeze pushes banks closer to the edge
The ECB announced two new Long-Term Refinancing Operations (LTROs) in October – one for 371 days and one for 406 days. Total borrowing at the October 26 auction was €101.5 billion, with 181 bidders for the 12-month LTRO (far lower than the 1,121 that bid in the June 2009 LTRO). But for how long can the ECB substitute itself for the interbank lending market?

Euromoney November 2011

Banks can't dodge the EU sovereign debt crisis

Euromoney March 2010 

ECB offers longer-term finance via six-month LTROs 
Euromoney May 2008 

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