1H24 Key aggregate figures: some pressure might still come from the supply digestion. European issuers were able to make good progress in frontloading their FY24 gross funding needs having covered c.64% of their overall funding target (in line with the 1H23 figure). However, considering the increasing negative effects of the ECB’s portfolio roll-off in 2H24, the coverage of the net recourse to the market for FY24 stands at 68%, vs. 75%. Assuming a slowdown in net buying activity from final investors in 2H24 for seasonal reasons, the supply-demand imbalance factor might become more of an issue in the next few months in determining some additional pressure on European real rates.
Italy. Gross issuance coverage at 61%, net issuance coverage at 98%, average maturity-at-issuance at 8.20Y (from 7.65Y last year). Looking ahead, excluding the issuance through ALM operation, we maintain our projection for the FY24 figure of gross funding needs at EUR360bn (with the main source of risk which is related to the disbursement of the tranches of the NGEU funds). In 2H24 we expect a third retail-BTP deal and a new 30Y BTP benchmark.
Spain. Gross issuance coverage at 66%, net issuance coverage at 95%, average maturity-at-issuance at 10.6Y (from 10.4Y last year). In terms of potential review of FY24 funding target, we cannot find any element that would per se warrant a relevant adjustment in the m-l term debt issuance by the Spanish Treasury. In 2H24 we expect a structural reduction of the average issued amount per auction (c.EUR5bn on nominal SPGBs). In terms of syndications, the two most likely options are a new nominal 20Y benchmark or a new 10Y linker (in September/October).
Portugal. Gross issuance coverage at 91%, net issuance coverage at 167%, average maturity-at-issuance at 16.7Y (from 16.6Y last year). In its 3Q issuance programme, the IGCP has confirmed the FY24 gross funding in m-l term debt at EUR16bn and thus we expect two additional auctions by the end of the year (arguably in September and October) and at least a couple of other ALM operations.