Issuers: Long dollars back on line
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Issuers: Long dollars back on line

The possibility that the long end of the US yield curve might continue to invert has supported long-end issuance from international sovereign and supranational issuers.

Both Italy and the European Investment Bank got great execution on 10-year new issues last month. The US two-to-10-year curve has been inverted since June and is now approximately –7 basis points.

For about 18 months, execution in the dollar market has been poor for quality international issuers. This has meant that Italy and other international borrowers were not as active as usual in dollars. But with 10-year treasury yields at six-month lows (4.72%), sovereigns offering a 50bp spread – as Italy did – are now a very attractive proposition for dollar investors.

The Republic of Italy sold $3 billion, upsized from $2 billion, via Citigroup, Goldman Sachs and JPMorgan. The EIB printed $3 billion through Citigroup, Deutsche and JP Morgan at treasuries plus 35bp – around Libor less 18bp.

Italy’s success was probably the most surprising, not least because of the uncertainty surrounding its ratings, budget and government.

“There is good interest for the 10-year maturity, and we probably chose a good window. And there are expectations that the yield curve will flatten in the near future,” says Maria Cannata, director general of the public debt management office at the Italian treasury.

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