(Bloomberg) -- Italy’s domestic investors have given a resounding thumbs-down to the populist government’s funding efforts.
The nation’s first offering of inflation-linked bonds targeted at the retail segment since the market turmoil in May garnered the lowest amount of orders for a BTP Italia issue since they were introduced in 2012.
The Treasury may still raise what analysts estimate would be around 5 billion euros ($5.7 billion), with the bulk of it coming on Thursday, the last day of the exercise that is open to only institutional investors. The notes will pay a minimum coupon of 1.45 percent.
The vote of no-confidence by local investors will be a worry for Italy’s leaders as they look to borrow more money to finance their policy proposals. The government has penciled in a wider budget-deficit target of 2.4 percent of gross domestic product, putting it in conflict with the European Union’s spending rules. The $2 trillion economy is the second-most indebted in the euro area.
Italian 10-year yields have surged almost 150 basis points this year to 3.48 percent, with a much-watched spread over comparable German bunds having more than doubled to 312 basis points.
“The spread is in the Italian press daily, so there is a good deal of awareness of recent volatility among Italian savers,” said Giles Gale, an interest rates strategy at NatWest Markets Plc. “Their support is important symbolically.”
The European Union took the first step toward imposing fines on the bloc’s fourth-largest economy Wednesday after stating the coalition administration’s spending plans violate the bloc’s rules. Italian Prime Minister Giuseppe Conte is scheduled to address the lower house of parliament at 5 p.m. local time today, Ansa reported.
Retail investors’ orders for the BTP Italia bond totaled 864 million euros ($984 million) at the end of the third day of the sale. That compares with the previous low of 974 million euros in 2012, and a high of 17 billion euros in 2013.
BTP Italia securities are typically sold once every six months.
