Market volatility may push Italy’s borrowing costs slightly higher

MILAN: Market volatility may push Italy’s borrowing costs slightly higher this year, to their highest since 2019, the country’s head of debt said.

A looming rate hike by the European Central Bank as soon as July along with the end of its asset purchase programme has inflated Italian government bond yields, pushing them to their highest since late 2018.

“Our target for 2022 stands at 0.83 per cent. It might be upwardly revised by a couple of basis points back to its 2019 levels,” Davide Iacovoni told Reuters in an interview.

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

Referring to the same market uncertainty, Iacovoni said that conditions are “not ideal, at the moment” for a dollar issue, but Rome still planned a US denominated offer in 2022.

The dollar index is hovering around its 20-year peak, benefiting from investors’ risk adversion as the growth outlook worsens especially for Europe.

Italy may offer a new green BTP, or sustainable government bond, in the second half of the year, probably ater tapping the 2045 outstanding note via auction.

It will be longer than ten- but possibly shorter than a 24-year maturity, Iacovoni said.

Containing the cost of borrowing has been a persistent challenge for Rome, which expects public debt to be 147 per cent of gross domestic product by the year end, down from 150.8 per cent in 2021 and 155.3 per cent in 2020.

Meanwhile Italy will fully support NATO membership for Finland and Sweden, Foreign Minister Luigi Di Maio said.