Few would deny that the Italian sovereign debt market is in a parlous state. But this fragility was highlighted in August 2012, when UniCredit issued a €750m, five-year covered bond deal, priced a full 100 basis points (bps) below equivalent Italian government bonds.
“It was the first time in the history of the covered bond market that a transaction was priced below respective government bonds so it was truly groundbreaking,” says UniCredit head of funding Philipp Waldstein. “Covered bonds began trading through governments on the secondary market at the beginning of the summer but people thought it was a temporary phenomenon. By August, the trend was confirmed and our deal went one stage further.”
