By William Wilkes & Nick Shamim

LONDON (MNI) – Italy has increased its bond issuance plans for this
year in order to fulfill its aid contribution to Greece and has already
started this process, said Maria Cannata, director general of public
debt management at the Italian Treasury.

The agency is now looking to sell around E240 billion to E250
billion in bonds this year, the Italian debt chief told Market News
International in an interview Friday.

Last year, Italy sold E277.54 billion worth of bonds, although some
of this was seen as pre-funding for 2010.

Italy’s contribution to the EU’s Greece aid package is E14.736
billion out of a total E110 billion package from the EU and IMF, under
the three-year economic and financial policy program. This year’s
contribution is estimated to be around E5.4 billion. The first tranche
of this loan E2.921 billion was paid in early May.

Since the European Union’s unprecedented E750 billion support
package for Greece announced on May 9, Italian yield spreads versus
German Bunds are now trading at their highest level since the creation
of the euro, amid market concerns about Italy’s financing needs for
the next few years.

The 10-year BTP vs German Bund yield spread earlier Monday widened
to +171 basis points having traded around +146 basis points before the
support package. The spread currently trades at +169 basis points.

Italy has around E120.85 billion worth of redemptions in
BTP/CCT/CTZ bonds this year to refinance and around E104.22 billion in
T-Bills by year-end, whilst coupon payments are estimated to be E23.625
billion, according to MNI calculations.

Redemption payments are due to remain elevated in coming years, and
estimated to be E191.0 billion in 2011, and E171.0 billion in 2012.

Cannata also confirmed that the debt agency has so far sold
E102.735 billion this year in medium-long dated BTP issues, 2-year zero
coupon CTZ bond, 7-year CCT and index-linked bonds.

The Italian Treasury is looking to sell a new 5-year 3.00% June
2015 BTP issue on Thursday as the current existing 5-year benchmark
issue — the 3.00% Apr 2015 BTP issue already has a E20.032 billion
current size outstanding. The Treasury is also due to tap the 4.00% Feb
2017 BTP along with the 4.00% Feb 2037 BTP issue. The size’s of these
issues is expected to be announced on Tuesday, but most strategists
expect around E8.0 billion issuance this week.

Italy normally sells 5-year, 15-year and 30-year BTPs at its
mid-month auctions, depending on demand and market conditions and 3-year
and 10-year BTP issues, 7-year CCT issue and index-linked BTPei issues
at its end-of-month auctions.

In terms of new bonds to be sold this year, Cannata said, “We issue
15-year and 30-year BTPs, although sometimes, following advice from our
economists we can reopen old ‘off-the-run’ bonds”.

Italy has so far sold a new 3-year BTP on March 20 for E4.0
billion, a new 10-year 4.00% 2020 BTP for E5.0 billion on March 30 and a
new 2021 BTPei issue — linked to the EU Consumer Price Index excluding
Tobacco for E3.0 billion on April 21.

When asked about the likelihood of a new 15-year linker issue,
Cannata said, “conditions are not right for launching a new benchmark.
However, we do have [existing] 10-year and 30-year linker issues that
can be reopened and they assure regular supply, as linkers do”.

The debt chief declined to comment on any forthcoming dollar
issuance, perhaps suggesting there are no current plans given the lack
of arbitrage opportunities in the cross-currency basis swap levels.

–London newsroom: 00 44 20 7862 7494; e-mail: william.wilkes@ntkn.com
nshamim@marketnews.com

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