Post on 07-Jun-2020
ANNO ACCADEMICO 2018-2019
SCIENZA DELLE FINANZE c.a.
PROF. GIUSEPPE EUSEPI
Lezione n. 32
10/12/2018
Lezione tenuta dal Dott. Fabrizio Tesseri (Dirigente Uffici II e VI,
Direzione II – Debito Pubblico, Ministero dell’Economia e delle
Finanze)
Update on Italian Public Debt
November 2018
Italian Public Debt in figures 1
Central Government debt: breakdown by instrument as of October 2018
Average Life: 6.78 years
Source: MEF
3
Securities Amount (€ Mln) %
BOTs 112.863,00 5,59%
Flexible BOTs 0 0%
CCTeu 139.345,74 6,97%
CTZs 55.614,58 2,13%
BTPs 1.409.287,81 71,78%
BTPs €i (indexed) 153.089,36 7,70%
BTP Italia (indexed) 70.637,63 3,48%
Atypical BTPs 313,66 0,02%
Foreign Debt in Euro 39.137,60 2,21%of which ISPA Bonds 8.631,61 0,45%
Foreign Debt Currencies 2.269,28 0,11%
Total Amount 1.982.558,65 100%
BOTs 5,69%
CCTeu 7,03%
CTZs 2,81%
BTPs 71,10%
BTPs €i (indexed)
7,72%
BTP Italia (indexed)
3,56%
Foreign Debt €uro
1,97%
Foreign Debt Currencies
0,11%
Evolution of debt composition by type of instrument and debt average life
Source: MEF
4
* Average life September 2017: 6,85
7,20
6,38
6,52 6,76
6,90
6,78
0
1
2
3
4
5
6
7
8
0%
10%
20%
30%
40%
50%
60%
70%
80%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sep-18
Years Floating rate (BOT+CCT, LHS) Fix rate (LHS) Inflation Linkers (LHS) Average life (RHS)
(Average life October 2017: 6.84)
Oct- 18
5
Interest rate risk: ATR and % 1y refixing*
* The Economic and Financial Sub-Committee on EU Sovereign Debt Markets (ESDM) has agreed an harmonized set of risk indicators in order to monitor market risks on a quarterly basis. Under criteria defined by the ESDM, inflation linkers are included within floating debt. Data also include Postal Bonds.
years %
Source: MEF
29,41
29,78
6,19
6,12
5,85
5,90
5,95
6,00
6,05
6,10
6,15
6,20
6,25
6,30
6,35
28
29
30
31
32
33
Refixing Risk 1Y (LHS)
Average Time to next refixing(RHS)
6
Sensitivity to interest rates shocks (parallel shift)
Given the current debt structure, expected sensitivity of interest expenditure to a 100 bps parallel shift of the whole yield curve turns out to be substantially unchanged since the previous sensitivity analysis
Interest expenditure/GDP
Years Update Sept. 2018 Update Apr. 2018
1st 0,11 0,11
2nd 0,27 0,25
3rd 0,39 0,36
Source: MEF, September 2018
7
Refinancing risk: Average Life and % 1y refinancing*
*The Economic and Financial Sub-Committee on EU Sovereign Debt Markets (ESDM) has agreed an harmonized set of risk indicators in order to monitor market risks on a quarterly basis. Under criteria defined by the ESDM, inflation linkers are included within floating debt. Data also include Postal Bonds.
years %
Source: MEF
14,68
15,83
6,86
6,78
6,4
6,5
6,6
6,7
6,8
6,9
7
14
15
16
17
18
19
20
Refinancing Risk 1Y (LHS)
Average Life (RHS)
8
Trends in average debt cost, cost at issuance and interest expenditure
Source: MEF, ISTAT, (National Bureau of Statistics
Source: MEF
9
Bond redemptions Jan. 2018 – Dec. 2020 (as of October 2018)
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2018 2019 2020
mln.€
BTPs BTP€i BTP Italia CCTs CTZs Foreign Debt
Breakdown by holders : foreign component is declining but without any major shift so far
(data as of July/August 2018)
Source: MEF, Bank of Italy
10
Central Government Securities = 84.9% of General Government Debt
Central Government securities (marketable)
Monthly changes in total Central Government securities (marketable) held by not residents*
Central Bank 19,00%
Resident MFIs 17,45%
Other resident FIs 22,44%
Other Resident 5,48%
Non Resident 35,63%
1,985 € Bln
* Data are derived from Bank of Italy’s Bullettin on «Public Finance:s: Borrowing requirement and Debt»
Source: MEF based upon Bank of Italy dataset 11
Central Government securities: breakdown by holders as of June 2018 (trends)
0,00%
10,00%
20,00%
30,00%
40,00%
50,00%
60,00%
70,00%
80,00%
90,00%
100,00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Jun-18
€ Bn CG Securities (marketable debt)
Central Bank Resident MFIs Other resident FIs Other Resident Non resident
Source: MEF based upon Bank of Italy dataset - Figures may not add up exactly due to rounding 12
Government securities breakdown by asset and investor
4Q2017
BREAKDOWN BY ASSET AND INVESTOR - 4Q2017 BTPs BTP€is BTP ITA CTZs
CCTs BOTs
Not resident 34% 18% 80%
Insurance Co. and Pension Funds 17% 14% 1%
Banks 14% 39% 11%
Households and Corporate 9% 1% 1%
Financial Institutions 6% 7% 7%
Central Bank 20% 21% 0%
100% 100% 100%
Public Debt management in 2018 2
Debt Policy for 2018 (I)
14
Scheduled redemptions in 2018 are about € 30 bn less than in 2017. This is the legacy of past issuance choices as well as of liability management transactions carried out in the recent past as exchanges and buybacks, that were heavily focused on 2018-19 redemptions.
Considering that net borrowing requirement is lower that in previous year, total issuance volume of medium-long term securities will be in the region of 250 bn euros. As of the end of October roughly more than 90% of the 2018 funding plan has been completed
BOT issuance volume has been kept in line with that of 2017 – or slightly more – thereby bringing the stock at the end of 2018 more or less to same level as of 2017 year-end (i.e around € 106Bn)
In the nominal space, issuance of BTPs has been predictable over the all segments up to 10 years, with some more weight on the 7-10 years’ sector vs the 3-5 years’ one, also to take into account the increase of volatility in this segment since May
On the nominal long end, supply has been spread out on all the lines (15-20-30-50 years) according to market conditions. Total share of long end issuance will continue to be relevant as in recent years.
Debt Policy for 2018 (II) and initial toughts for 2019
15
On floaters, supply has been kept regular and at adequate size taking in account redemptions in order not to significantly alter the stock at year-end, thereby keeping interest rate risk under control
In the inflation segment:
A new 5 years introduced in March
After the issuance held in the month of May, a further BTP Italia issuance is scheduled for November
Derivatives: following the entering into force of a specific legislative framework, a bilateral CSA system is being implemented, allowing counterparties to ease meeting regulatory requirements and to lower possible FX hedging costs (see following point)
For 2019 more focus will be given to retail investors (even, if possible, with new tailored instruments) and foreign currency issuance (thanks to the introduction of CSA as mentioned in the previous point)
Participation to nominal BTP auctions : breakdown foreign/domestic buyer
*These data are collected by the Treasury from Primary Dealers in occasion of nominal BTPs auctions. Since representing flows recorded at the time of auctions, they are not comparable to data about stock owned by investors recorded at Bank of Italy.
16
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Ja
n-1
6
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Au
g-1
6
Sep
-16
Oct
-16
No
v-1
6
De
c-1
6
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
De
c-1
7
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Italian buyer Foreign buyer
The role of buy-backs and debt exchanges in managing redemption profile
17
Buy-backs and debt exchanges are steadily used by MEF as a tool of the overall Debt management risk policy, as they may actually contribute to reduce refinancing risk and smooth redemption profile.
Buy-backs are also used as a way to contribute to an adequate liquidity and efficiency of the secondary market especially in periods of market stress (like since mid-May this year)
Securities to possibly buy back are selected by Treasury on several criteria including redemption profile, bond liquidity (aiming to avoid negative impacts in the secondary market) and impact on outstanding debt (bonds traded at par or below maximize the effects in terms of outstanding debt reduction). Buyback are performed via a competitive auction or a bilateral transaction
Exchanges are performed via an exchange auction or via electronic trading system, allowing the Treasury to directly operate on the secondary market
Impact of all buy-backs and exchange transactions on future redemptions profile
18
Source: MEF
1.079
2.421
809
440
2.520
188
2.387
1.496
2.687
2.713 2.848
5.809
429
2.935
550
2.948 640
1.451
1.946
3.199
3.672
976 288
1.406
2.783
1.777
1.823
1.831
250
450 1.000
350
300 1.325
763
750 471
773
608
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
50.000
mln.€ After exchange and buy-back transactions Treasury buyback
A proactive approach to face increasing volatility: buy-backs and exchange transactions in 2018
19
Source: MEF
• 2018 Bilateral Buybacks
• 500 mln (BTP 2019, 2020 area) on May the 31st
• 700 mln (BTP 2020, CCTeu 2019-20 area) on June the 22nd
• 950 mln (BTP 2020, CCTeu 2019-22 area) on August the 3rd
• 2018 Exchanges on electronic platform
• 2000 mln (issuance of a BTP 21, buyback of BTP 2018-19 area and CTZ 2018-2019 area) on April
the 18th
• 2100 mln (issuance of a BTP 28, buyback of BTP 2019-20-21 area) on October the 3rd
• 3800 mln (issuance of BTPs 25,26,28,29 and 46, buyback of BTP Italia April 2020) on October the
18th
• 2018 Public Buybacks • 2.750 mln (BTP€i 2019, CCTeu 2020, 2022) on September the 7th
Market data 3
Liquidity of the secondary market
21
10 yr BTP bid-ask spread, b.p. (January 2016-September 2018)
Source: MTS Italy interdealer platform
0,00
5,00
10,00
15,00
20,00
25,00
Secondary market volumes (€ Mln)
* Data collected from Italian primary dealers only. Single counted.
22
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
160.000
180.000
200.000 MTS Volumes
0
50.000
100.000
150.000
200.000
250.000
300.000
350.000
400.000
450.000Monthly Volumes HRF out MTS*
Repo market volumes
23
0,00
0,50
1,00
1,50
2,00
2,50
3,00
Trill
ion
s
Special Repo General Collateral
www.publicdebt.itit
www.mef.gov.it
24