UPDATE 2-Italy treasury to tap small investors again in 2013

Fri Dec 21, 2012 11:58am EST

* Italy aims to lengthen average debt life in 2013

* Treasury to tap retail investors again next year

* Global investors more interested in Italian debt (Adds quotes from treasury's document, details)

By Francesca Landini

MILAN, Dec 21 (Reuters) - Italy plans to sell two new issues of its retail BTP Italia bond next year, a treasury borrowing plan showed, after the bond's success last year helped pull the country back from the brink of the euro debt crisis.

Analysts had expected the treasury to issue more retail debt after it raised 27 billion euros ($36 billion) by selling the BTP Italia bonds to individuals and households.

This paper is a four-year inflation-linked bond Italy launched for the first time in March, when the treasury allowed small investors to buy it directly via the Internet.

Rome indicated on Friday it could put a cap on the amount of new issues, while this year it sold the full amount investors had demanded for each tranche.

The structure and maturity of the BTP Italia, however, will remain the same.

Looking beyond the domestic market, Rome hinted in its borrowing plan at the possibility of issuing debt on global markets after being held back this year by financial turbulence.

"Global investors recently sent signals they are more interested (than in 2012 in Italian debt) at cheaper borrowing conditions for the treasury. This set the basis for a likely return of the treasury on these (global) markets," the treasury said about launching debt denominated in foreign currencies.

The European Central Bank's pledge in early September to buy bonds of vulnerable euro-zone countries reduced drastically the risk of a euro break-up pending on Rome.

This brought some foreign investors back into the market and enabled Italy, one of the world's biggest sovereign debtors, to meet its borrowing target of 465 billion euros with falling yields.

However, Italy could still face headwinds in the months leading up to general elections, which are expected to be held at the end of February.

LONGER AVERAGE LIFE

The Treasury's 2013 borrowing guidelines said it aims to lengthen the average life of debt which fell to 6.49 years at end-November from 6.99 at end-2011.

"Considering lower borrowing needs in 2013 and the strategy to reach a longer average debt life, the treasury will likely issue fewer bills in 2013 than it did in 2012."

Rome did not spell out its refunding needs for next year. However, analysts expect it to have to borrow around 420 billion euros, about 10 percent less than in 2012.

To raise average debt life towards 7 years, Rome will come back on the longer segment of the BTP curve tapping existing bonds, reopening issues it no longer sells on a regular basis or even launching new issues.

"If market conditions are in place the treasury will use a syndicate of banks," the treasury document said about issuing new BTP bonds with maturities of 15 to 30 years.

Rome reopened a bond maturing in March 2026 at mid-month, in the last auction to be settled in 2012. It was first issued more than two years ago.

In addition, Rome announced it will come back to a monthly issuance for its floating-rate CCTeu notes and that it plans to do more debt buy-backs next year.

All new bonds with a maturity longer than one year will include Collective Auction Clauses (CACs) in line with the treaty to create a permanent euro-zone bailout fund, the European Stability Mechanism (ESM), the treasury said. ($1 = 0.7555 euros) (Editing by Jennifer Clark/ Ruth Pitchford)

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