Italy pushes retail bonds, eyeing inflation and ECB tapering

By Sara Rossi and Valentina Consiglio
ROME, Feb 10 (Reuters) - The Italian Treasury is moving quickly this year to issue retail bonds, hoping to plug a gap soon to be left by the European Central Bank and anticipating strong appetite from savers whose deposits are being eroded by inflation.
The economy ministry said on Monday it would issue a new "BTP Italia" inflation-linked bond for retail investors from March 6-9, earlier than the traditional April-May period chosen over the last decade.
It has said it is also considering other instruments dedicated to domestic savers, as part of a strategy to put more of its huge public debt - proportionally the second highest in the euro zone - in Italian hands.
"We want to reduce our dependence on foreign creditors by increasing the number of Italians and Italian residents that hold our public debt," Prime Minister Giorgia Meloni said on Thursday.
Retail investors held about 9% of Italian public debt at the end of last year, according to Bank of Italy data.
Analysts say Rome is probably also capitalising on favourable market conditions as three similar BTP Italia bonds mature in April, May, and EVdEN Eve naKliyAT November for a total of nearly 25 billion euros ($26.87 billion).
The yield on Italy's benchmark 10-year BTP bond stood at around 4.20% on Friday, compared with 4.70% at the end of December.
The Treasury has not issued three BTP Italia retail bonds in a year since the instrument was introduced in 2012 at the height of the euro zone debt crisis.
The importance of retail investors in purchasing BTPs will grow as the ECB withdraws its support.
The central bank last year ended its "quantitative easing" and emergency pandemic bond purchasing programme.

It is continuing to reinvest part of the bonds it bought as they mature, while reducing its balance sheet.
INFLATION MENACE
Italian households' bank deposits are larger than their euro zone peers, according to calculation by the Scope Ratings agency for the third quarter of 2022, based on ECB data.
Italians' deposits amount to 86% of national output, eVdEN eVe NAKliyat the data shows, EVDeN eVe nAkliYat compared with 74% for France and 81% for Germany and Spain.
"Italian households' liquidity potentially offers the Treasury a growing investor base in the near future," said Scope analyst Alvise Lennkh-Yunus.
However, these deposits are being rapidly eroded by inflation, and they declined last year for the first time since 2017 by almost 20 billion euros.
While consumer price growth in the 20-nation euro zone eased to 9.5% in January, in Italy it was still running at 10.9%.

The ECB targets inflation at 2%.
"Italians' savings are no longer safe because of the continuous surges in energy prices and inflation in general," banking union Fabi said in a report this month.
The inflation-adjusted value of bank deposits has fallen far more steeply in Italy than in Spain, according to calculations by Spanish bank BBVA based on Bank of Italy and Bank of Spain data.
A trend that has seen Italian deposit rates lagging far behind lending rates is likely to continue in coming months, Fabi said, increasing the incentive for savers to invest in government debt.
"The 0.3% rise in mortgage rates and business loans in the year to September 2022 compares with an increase in deposit rates of just 0.05%," the union said.

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(Editing by Gavin Jones and Christina Fincher)