Italy held a patriotic drive to encourage people to buy bonds yesterday in a desperate effort to prop up an ailing market after warnings from France and Germany that Rome’s debt mountain could kill the euro.
Italian banks waived their fees on bond purchases for a day in a special initiative on the secondary market, where borrowing costs have surged amid international concern over Italy’s €1.9-trillion debt.
Long-term borrowing costs have shot up as high as eight per cent – levels widely considered unsustainable for the longer term.
The Treasury on Monday raised €567 million in bonds indexed to eurozone inflation due in 2023 but the rate jumped to 7.3 per cent from a previous sale at 4.6 per cent while the amount was less than expected.
Leading business people, students and even footballers declared they were taking part in yesterday’s initiative entitled “BTP Day” (“Bond Day”) but there appeared to be little take-up among ordinary people.
“I was expecting a lot of movement but until now there’s been little demand as far as I know,” said Francesco Montuori, the manager of a Rome branch of Intesa Sanpaolo, Italy’s largest retail bank.
Many people did not know about the initiative despite ample media coverage in recent days, with only one man, 50-year-old Marco saying as he walked into the bank: “Yes, I heard about it but I’m not interested.”
The Italian Banking Association (ABI) admitted the initiative was “symbolic” but said the drive could be important as a show of “Italians’ confidence in their own country... (and) to improve the judgement of global markets.”
But there were signs the idea had attracted some of the country’s savers. Italy’s third largest trading company, Hi-Mtf, announced a marked increase in small-time investor interest, clocking up 9,000 transactions worth €241 million, compared to their usual rate of 1,000 deals a day.
“They are small or tiny orders, in the few thousand euros mark, which shows it is savers who are buying,” said Gianbattista Roversi from Hi-Mtf. “Italians in difficult times know how to react,” he said.
Italy’s UniCredit bank said: “The result has been definitively positive, with higher than average volumes.
“The volumes of bonds on the secondary market doubled today compared to the average over the past few weeks,” it said.
Azimut asset management in Milan meanwhile launched a “Solidity” fund, with 50 per cent off commissions, as “a sign of their faith in the Italian system.”
Patriotic bond buyers in Bologna even organised a group hug to celebrate their part in the struggle to save Italy from financial catastrophe.
Financial blogger Paolo Barrai, however, bought ad space in Libero newspaper to warn Italians about taking part. “At the moment it’s risky for a normal Italian family to buy bonds,” he said in the advert.