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Better to protect yourself, given the time they run: no alarms running in the branches or apocalyptic forecasts. But the day the government placed 6.5 billion Bot at six months, its yield was only slightly higher than that of the previous auction (0.163% against 1.59%) and on the eve of the auction to medium / long-term November 29, the country's first bank, Unicredit, brings real news on the Italian bond front. And this is not a totally positive news.
Because if it is true that the Milan institution has placed the 3 billion dollar-denominated 5-year bonds, it is also chronic that paying a yield equivalent to 420 basis points above the rate of the 70 basis points extra-swap paid for the senior bond at age 5 not preferred placed only in January of this year, as shown in the table below.
In short, a concession of nearly 150 points compared to current market rates, bad signal proxy already deteriorating financing conditions for our banks, after weeks of increasing margins and political tensions between the government and the European Commission. In short, a good deal, net of the improved capital position and subordinated ratio that Unicredit will benefit from issuing (around 73 basis points for risk-weighted badets, Rwa), to leave the market banned thought another fact: it was the fact that everything was entrusted to a single buyer, Pimco, the largest bond fund in the world.
And, incidentally, one of the two buyers of the 20 billion Npl package sold by Unicredit at the beginning of the year to meet the recommendations of European banking supervision. But beyond the numbers and their interpretation, certain facts remain indisputable. First, if the strongest and strongest Italian banking group is to pay an additional return from this level for financing, what will be the price charged to the smaller and wealthier parties?
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Unsurprisingly, the data is clear: since the beginning of the year, Italian banks have issued bonds for only € 60.5 billion, the minimum since 2013. More, within a month , except surprises, at the next meeting of the ECB's board of directors, the lintel of Qe (Quantitative Easing) as artificial compressor of the sovereign spread, the rate paid by Unicredit represents an additional reason for tension for the public of banks, still overburdened by construction, whose decline in value could affect their balance sheets.
Unsurprisingly, the Vice President of the European Commission, Valdis Dombrovskis, intervened in record time, according to which the increase of the bond yield placed by Unicredit, "is a consequence of the turbulence of the markets: for the securities and sovereign debt, the gap has increased significantly over last year, which has implications for the real economy. " In short, if Prime Minister Conté's new "politics of smiles" and Minister Tria's art of mediation have brought a touch of relaxation in the dialogue between the government and the European authorities, here's the EU – through his more intransigent "hawk" – he did not fail to convince the Italian executive of his political responsibilities towards the markets. Bad signal.
And if Dombrovskis has always repeated that the widening of the gap "has increased the cost of financing for households and businesses and will have affection on the indicators of trust", a strategist apparently less Negative than Unicredit's question by Abn Amro, Tom Kinmonth, but confirms the same medium-term fear for Italian stability: "The price paid, well above the market rate, will have an impact on the profitability of # 39; Unicredit but will put the bank in a better position in terms of capitalization over an extended period ".
Indeed, "the possibility of further deterioration of the Italian rating could have justified the timing chosen by Unicredit to issue as well as the accepted off-market conditions". The bank did not officially comment on the outcome of the placement, nor the composition of the maxi-bond, leaving the question open as to the nature of the transaction. In other words, private placement in agreement with Pimco or, in fact, the operation of funding on the market – valid in accordance with the new prudential standard Tlac (total capacity of absorption of losses) – through a senior bond not preferred exactly like the one published in January, which only saw the bottom of the ocean in question?
The second hypothesis seems confirmed. Paradoxically, however, even the first badumption – the most benign in the context of Italian financial tensions – would not implicitly bring good news, since it could be read by the operators not just as a definite advance towards the last window of calm markets before 2019, which now faces a challenge (an example that, if any, could soon be followed by other market players), but also as a kind of do ut implied with after the sale of Npl took place a few months ago. In fact, Pimco would have operated as Unicredit's "private BCE" – but much more demanding in terms of price – before the end of QE and the return of the market to normal.
One thing is certain, as pointed out at the end of October Mario Draghi: the words of the government are doing damage. Certified by Valdis Dombrovskis. At present, the path of negotiations with the EU does not only seem to be rising, compared to the timid overtures so far filtered by the government, but even more marked by the image of a cannon shot at the temple.
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