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  • Pietro Marchesano

Lessons and ideas from the Italian COVID-related debt issuance

Will the recent record-breaking €22.3bn issuance pave the way for sovereign green or social impact bonds?

Two weeks ago, the Italian government completed the sale of €22.297bn BTP Italia debt securities, breaking the previous record set in November 2013, when €22.271bn were raised [1].

BTP Italia bonds were launched for the first time in 2012 to expand and diversify the country’s debt product offering. They constitute a segment of sovereign securities indexed to the Italian inflation rate and were conceived to meet the needs of retail investors. Their maturity ranges from 4 to 8 years, they are redeemed at par, and they guarantee a minimum annual coupon rate plus a bonus payment for investors that purchase at issuance and hold until maturity [2].

There are three main reasons behind the May record issuance.

First, the financial terms were unquestionably more attractive than those of the last issuance in November 2019. The coupon rate increased from 0.65% to 1.4%, the bonus payment doubled to 0.8%, and the maturity was reduced from 8 to 5 years [3] ; [4]. These adjustments made investors feel comfortable, despite the uncertainty caused by the pandemic.

Second, the Merkel-Macron plan to help the EU countries hardest hit by the pandemic was revealed with perfect timing on Tuesday, May 19th – the second day of placement. As the historic proposal broke the political deadlock regarding the EU fiscal response to the crisis [5], markets surged and the Italian borrowing cost substantially decreased [6], further bolstering the success of the issuance.

Finally, government and treasury officials repeatedly announced that the proceeds of the issuance would be used to finance measures related to the Covid-19 pandemic [7]. This ‘call to action’ generated an interest among small retail investors hardly seen before: almost 385,000 purchase orders were executed and 60% of them involved less than €20,000 [8].

It is generally not advisable to base a country’s strategy for debt issuance on attractive – hence expensive – financial conditions, or on externally driven – hence unpredictable – serendipitous coincidences. However, issuing debt with a clear commitment to finance specific policies does provide some food for thought.

More than ever, it is important for retail investors to know what their investments will finance and what sort of impact they will generate.

Investors’ interest in the impact their money generates. Source: Morgan Stanley (2019)

This trend has mainly been observed among millennials and has recently been one of the strongest drivers of growth in the investment industry, especially when seen in connection with the broad concept of sustainability [9].

Investors’ interest in sustainable investing. Source: Morgan Stanley (2019)

Social impact bonds and green bonds are two types of instruments that have been developed to address the appetite for social and environmental sustainability and to facilitate the allocation of financial resources tackling these challenges.

A social impact bond (SIB) is a performance contract between problem owners (e.g. underprivileged communities) and investors, where the latter shoulder the risk and finance an intervention addressing a social challenge; the government then pays investors based on the degree to which social and/or financial objectives are achieved [10].

Structure of a social impact bond, example. Source: ABN AMRO (2015) [9]

Green bonds are designed instead to raise money to finance climate change mitigation and adaptation projects.

Whereas SIBs still represent a niche market and little evidence is available on the financial convenience for governments, the existence of a beneficial green bonds' yield spread is more documented. MSCI finds lower yields for green rather than conventional bonds from the same corporate issuer (i.e. same underlying credit risk), thanks to a higher demand [11]. Similarly, Bloomberg reports that the yield curve for supranational green bonds is lower than the yield curve of a benchmark portfolio of non-green bonds by up to 25 bps [12].

Yield curve of green euro-denominated supranational bonds vs non-green. Source: Bloomberg (2017) [10]

The impact investing industry, which includes SIBs, reached more than $500bn in assets under management as of the end of 2018 [13]. Likewise, cumulative issuance of green bonds surpassed the $1tn mark in November 2019 [14] . Although there are sensible concerns regarding the risks of impact- or green-washing and the need for clearer standards, the momentum behind these instruments represents an opportunity the Italian government should seize.

Issuing such bonds would certainly help boost the appeal to sovereign bonds among Italian retail investors: a necessity, considering that the Treasury aims to double the amount of sovereign debt owned by nationals [15]. Furthermore, well-designed social impact and green bonds may contribute to alleviate some long-standing problems in the country – ranging, for example, from organized crime and old infrastructures to an unacceptable gender gap.

If government preference leaned towards green bonds, there would be no need to reinvent the wheel: the Netherlands already issued a €5.9bn sovereign green bond last year [16]. If the government were to opt for social impact bonds, some upfront work with sub-sovereign entities would be required to define a proper legal framework, involving communities at all levels; nonetheless, such an effort would bring a valuable first-mover advantage.

In any case, as public debt is set to hit €2.6tn this year [17], keeping an eye on what the younger generation demands is imperative, and may yield positive results in terms of both debt sustainability and larger economic and societal transformation.



[2] Ministero dell'Economia e delle Finanze (MEF) Dipartimento del Tesoro, 2020 (a). BTP Italia. Available here:

[3] Repubblica, 2019. Btp Italia, il tasso sale allo 0,65% annuo. Chiude a 6,7 miliardi. Raffaele Ricciardi, Economia & Finanza. Available here:

[4] Ministero dell'Economia e delle Finanze (MEF) Dipartimento del Tesoro, 2020 (b). Information Memorandum BTP Italia 26.05.2025. Available here:

[5] Politico, 2020. Germany buckles to France on coronavirus recovery plan. Matthew Karnitschnig and Rym Momtaz, 05/19/2020. Available here:

[6] The Economist, 2020. The Merkel-Macron plan to bail out Europe is surprisingly ambitious. 21/05/2020. Available here:

[7] Radiocor, 2020. Iacovoni: "Ecco la sedicesima emissione del BTP Italia". 08/05/2020. Available here:

[8] Il Sole 24 Ore, 2020 (b). Btp Italia: ecco chi l’ha comprato, tra piccoli risparmiatori, banche e investitori esteri. 24 Finanza. Available here:

[9] Morgan Stanley, 2019. Sustainable Signals: Individual investors interest driven by impact conviction and choice. Morgan Stanley for Sustainable Investing. Available here:

[10] ABN AMRO, 2015. Social Impact Bonds – Opportunities and challenges in the Netherlands. October 2015. Available here:

[11] MSCI, 2020. Have corporate green bonds offered lower yields? Zach Tokura, 10/03/2020. Available here:

[12] Bloomberg, 2017. Investors are willing to pay a ‘green’ premium. Bloomberg New Energy Finance. Green Finance - Analyst Reaction. Dan Shurey. Available under Bloomberg LP subscription.

[13] Global Impact investing Network (GIIN), 2019. Sizing the Impact Investing Market. Available here: [14] Financial Times (FT), 2019. Green bonds hit $1tn amid growing pains. Gillian Tett, Patrick Temple-West and Billy Nauman. Moral Money. Available here:

[15] Reuters, 2020. Exclusive: Italy doubles down on debt sales to retail investors. Giuseppe Fonte, Business News. Available here:

[16] Climate Bonds Initiative (CBI), 2020. 2019 Green Bond Market Summary. Available here:

[17] Il Sole 24 Ore, 2020 (c). Il debito al 155,7% “costa” 43mila euro a ogni italiano. Il deficit cancella le clausole Iva. 24 Finanza. Marco Rogari, Gianni Trovati. Available here:

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