(Bloomberg) -- Ordinary Italians answered the call to fund their government as they clamored to buy a new class of bonds designed especially for them.
The nation closed its first placement of the four-year securities called BTP Valore, which raised more than €18 billion, a record amount for a debt offering pitched to retail investors, according to the Ministry of Economy and Finance. That’s nearly twice the size of an inflation-linked bond targeted at individual savers in March.
Burdened by one of Europe’s biggest debt piles at about 145% of economic output, Italy has been enthusiastically courting individual savers as it seeks to tap fresh sources of funding. As for other nations in the euro zone, the task has taken on fresh urgency as the European Central Bank winds down its mass purchases of government debt.
“Italian households have a strong tradition of channeling savings to the government,” said Joann Spadigam, rates strategist at NatWest Markets. “At high yields, that’s coming back strongly.”
NatWest’s €30 billion estimate for Italian retail bond supply this year increasingly looks like it might come up short, she said prior to the sale’s close.
BTP Valore will pay a coupon of 3.25% for two years, stepping up to 4% for the remainder of the term. As a point of comparison, new Italian household deposits with an agreed maturity of as much as a year pay 3.1%, according to ECB data.
Demand from residents, who once held more than a fifth of government debt, dwindled as years of central-bank stimulus and ultra-low interest rates whittled down yields. But returns have surged as the ECB embarked on an aggressive cycle of interest-rate hikes.
Finance Minister Giancarlo Giorgetti has previously stressed the importance of increasing the holdings of treasury notes among Italian savers, which he sees as stabilizing force for yields.
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Retail demand for government debt is a trend that’s emerged elsewhere across Europe, partly in response to the reluctance of well-funded banks in some countries such as Spain to stump up more for deposits. In Portugal, for example, appetite for government-issued retail debt certificates has jumped, triggering some outflows from commercial banks.
Italy already has two types of bonds targeted at retail investors: BTP Italia, which is indexed to the inflation rate, and BTP Futura, linked to the growth of the economy.
Those who hold the new class of bond for the full four-year term will also receive an extra final bonus payment equal to 0.5% of their total holding.
(Updates with final details of the issuance throughout.)
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