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Italy sees record demand for new green bond ahead of ECB cut

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Recasts with price, background in paragraph 3, quote

By Sara Rossi and Antonella Cinelli

MILAN/ROME, May 14 (Reuters) -Italy's Treasury has seen record demand for a new green bond it launched on Tuesday as attractive Italian note returns lured investors ahead of an expected rate cut in June by the European Central Bank.

The Treasury sold 9 billion euros ($9.7 billion) of a new green BTP bond maturing Oct. 30, 2037, which drew final orders over 84 billion euros from institutional investors, lead managers said.

The demand compares with a previous record of over 80 billion euros in the first green BTP bond issuance in March 2021, spurred by the growing appeal of environmentally-friendly assets. Demand ranged from around 40 billion to 55 billion euros in the three following green BTP bond placements in 2021, 2022 and 2023.

Maurizio Gozzi, head of Fixed Income & SSA DCM Italy at Credit Agricole CIB, said several factors were behind Tuesday's success, such as investors' appetite for appealing Italian bond yields, a political situation perceived as not worrisome, a stable outlook for rating agencies, and the scarcity of green assets.

"Put everything together and you have the winning combination," he said.

Markets have so far this year shown a healthy appetite for Italian bonds, in a boon for Rome's efforts to manage its huge pile of public debt, proportionally the second-largest in the euro zone after Greece.


Last week Italy sold more than 11 billion euros in a new 6-year BTP Valore bond aimed exclusively at retail investors. However, this was considerably below the record 18.3 billion euros it drew in February from a similar note.

"Final orders at more than 80 billion euros for a 9 billion size is still a success and proves the attractiveness of Italian debt, not questioned by the result of the BTP Valore issue last week", said Christopher Dembik, senior investment advisor at Pictet AM.

The closely-watched differential, or "spread", between Italian and German bond yields narrowed to around 130 basis points on Tuesday, from nearly 170 basis points in early January.

Mauro Valle, head of fixed income at Generali Asset Management, said the spread holding steady despite Tuesday's green bond sale following a sizable bond auction and last week's retail bond sale meant "investors are present and buying the BTP".

In the year to date, the Treasury has sold around 50% of medium to long-term bonds of its 2024 issuance target of 360 billion euros, Gozzi said.

The yield on Tuesday's note was set at 9 basis points over the March 1, 2037 BTP bond, and below the initial level of 11 bps, lead managers added. BNP Paribas, Credit Agricole, Deutsche Bank, NatWest Markets and UniCredit managed the sale.

($1 = 0.9264 euros)

additional reporting by Yoruk Bahceli, writing by Sara Rossi, editing by Cristina Carlevaro, Alvise Armellini and Emelia Sithole-Matarise


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