Hike funding

Italy’s cost of financing in 2022 could hit debt peak in 2019

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MILAN, May 13 (Reuters) – Market volatility could push Italy’s borrowing costs up slightly this year to their highest level since 2019, the country’s debt chief said on Friday.

An impending rate hike by the European Central Bank as early as July and the end of its asset purchase program inflated yields on Italian government bonds, pushing them to their highest level since late 2018.

“Our target for 2022 is 0.83%. It could be revised upwards by a few basis points back to its 2019 levels,” Davide Iacovoni told Reuters in an interview.

Italy’s funding cost fell to a record low of 0.10% in 2021.

Referring to the same market uncertainty, Iacovoni said conditions are “not ideal, at this time” for a dollar issue, but Rome still expects a U.S. dollar-denominated offering in 2022.

The dollar index is hovering around its 20-year high, benefiting from investor risk aversion as growth prospects deteriorate, particularly for Europe.

Italy could come up with a new green BTP, or sustainable government bond, in the second half, likely after tapping into the outstanding 2045 note through an auction. It will be longer than ten, but possibly shorter than a maturity of 24, Iacovoni said.

Containing the cost of borrowing has been a persistent challenge for Rome, which expects public debt to reach 147% of gross domestic product by the end of the year, up from 150.8% in 2021 and 155 .3% in 2020. (Report by Alessia Pe, Sara Rossi, Antonella Cinelli, edited by Maria Pia Quaglia and Barbara Lewis)