Ministero dell'Economia e delle Finanze

Global Capital - 12/19/2017

by Craig McGlashan

Public sector debt bankers and fellow debt management office heads have lined up to praise the impact on the Italian and wider European sovereign debt markets of Italy funding head Maria Cannata, who is retiring after nearly three decades at the country’s Treasury. While universally agreeing that she would be greatly missed both professionally and personally — including her sense of humour - there was also a strong confidence that the team she has put in place will be able to meet all Italy's future challenges.

Cannata, director-general, public debt at the Italian Ministry of Economy and Finance, will hand over the reins to her deputy Davide Iacovoni on February 1. A source at the Italian Treasury said that the decision should ensure "perfect continuity" - and bankers agreed.

“Maria has managed her team beautifully and grown a number of talented professionals, like [Davide] Iacovoni, [Fabrizio] Tesseri, [Federica] Verani, [Silvia] Vassallo, [Dora] De Simone and [Alessandro] Iacono that will be ready to manage the transition once she retires,” said Andrea Colombo, head of DCM for Italy and Greece at JP Morgan in London.

“It’s a very strong team and very united. She’s also done an excellent job in fostering equal opportunities between men and women.”

That sentiment was echoed by another sovereign DCM head, speaking off the record. “In a world of men, it’s great to see a lady that has reached the top and been extremely successful in that position,” he said.

Several bankers spoke of her calmness under pressure as well as her authoritative mastering of facts and figures — often knowing much more about the syndicate process than the syndicate teams she was working with and investors she was meeting.

“One of the first sovereign roadshow meetings I ever did was with Maria in New York many years ago,” said Philip Brown, head of SSA DCM at Citi in London. “Maria came straight to the first meeting from JFK to meet a quite prominent and successful hedge fund manager in mid-town, who turned up in jeans and a T-shirt.

“His first question was about the elasticity of Italian tax revenue to an incremental percentage increase in GDP. Maria pulled out an enormous pack of paper from her briefcase. It took her one or two minutes, then she had the answer — while I was still trying to absorb the meaning of the question! It was so impressive that we were with this clever money in mid-town New York, but Maria was ahead of them.”

On many occasions, bankers said that far from performing the traditional investment banking role of advising Italy as a client, they found themselves learning from Cannata.

“For banks, the hard work covering issuers is in winning the mandate — with the Tesoro that was where the hard work started,” said Sean Taor, head of European DCM at RBC Capital Markets in London. “A day trip to Rome was never a holiday".

“Maria knew the market very well, and knew exactly what she expected from her banks. She was hard working, demanding, always very professional and it was an honour to have worked with her. She is a credit to her country — I learned a great deal from her, and I wish her all the best for her future.”

Others highlighted her solidity and toughness, even when finding herself holding a dissenting view.

“Maria has always been a completely dedicated and passionate proponent of the Italian story, unafraid to commit her own views and often showing that the consensus opinion is not always the right opinion,” said Lee Cumbes, head of EMEA public sector debt and risk solutions at Barclays in London.

“Maria is one of the toughest negotiators in the SSA world — and beyond,” said Luca Falco, deputy head of global syndicate and capital markets at UniCredit in Milan. “Over many years, she never left a cent for the market. Instead, she always saved every cent for the taxpayers — those that actually pay the interest on the debt — before anything else.”

Citi’s Brown added: “She’s extraordinarily adept technically. She’s seen it all — she’s done more syndications than any SSA syndicate manager. It’s not that she’s aggressive on pricing — the point is she’s seen so many order-books over the many years of political and economic volatility, that her understanding of how markets are likely to react to changes in guidance though a bookbuilding very often means her instinct is stronger than most of the syndicate managers she’s working with.

“We’ll miss her very much.”

A lira laughs

While Cannata always demanded the best from her syndicate bankers and for the Italian taxpayer, a trip abroad with her was not without its fun moments.

“We were in Asia when Italy was still using the lira,” said Frédéric Gabizon, head of European public sector and French DCM at HSBC in Paris. “In between investor meetings, we were talking about Italy’s debt stock, and she said: ‘There’s trillions and trillions and trillions and... there’s so much I can’t remember.’ She phrased it in a very funny way.”

Of course, Cannata did always have a formidable command of Italy’s debt situation as well as the behaviours of the wider markets. That stood her in good stead over several times of crisis and instability — something made clear by the fact that since becoming director-general in December 2000 she has served under nine governments and seven prime ministers.

“Maria’s been running the biggest sovereign debt in Europe for quite some time, in the most hectic and volatile period of recent times, and managed to keep the boat very much afloat,” said Gabizon. “Since she started [at the Treasury] in 1980 she’s been so stable in an unstable political world, in Italy in particular. It’s quite amazing and quite stunning.

“She deserves a statue.”

Particular examples of Cannata’s solidity in an uncertain world were the eurozone sovereign debt crisis and Italy’s transition to the single currency.

“All of Maria’s success happened over a couple of financial crises that were challenging,” said JP Morgan’s Colombo. “The sovereign debt crisis was particularly tough at times. There were moments when a lot of people would have panicked. But Maria manged to keep the boat floating and reassure market participants and dealers as to the best course of action — so she managed to navigate these torrid waters.”

He added: “She oversaw what was clearly a major job in the redenomination of that amount of debt from one currency to another overnight.”

Big task

“That amount of debt” neatly sums up what many bankers said was Cannata’s greatest achievement — not just managing one of the world’s largest sovereign debt piles, but doing so with aplomb.

“The volume of transactions Maria has overseen is just extraordinary,” said Citi’s Brown. “Citi has worked on 14 syndications in euros — totalling €72bn — and six in dollars with her over the last 15 years. Italy has been through extraordinary periods of economic and political volatility over the years and Maria has managed this enormous funding programme through thick and thin.

“That’s what’s most impressive about her time in the market. Italy and Europe have been through crises and challenges but BTPs have always been and remain the benchmark, often with greater stability than other core markets.

“We talk about the spread to Bunds, but at many times it’s been more appropriate to talk about spreads to BTPs. BTPs have been the stable benchmark for much of the last 15 years.”

Cannata has been with the Italian Treasury since 1980. She started her Treasury career studying debt structure and econometric forecasts of the country’s borrowing requirements, up until 1992.

She then took responsibility for domestic debt, looking after issuance strategy, among other responsibilities, before becoming director-general in 2000.

Cannata will be leaving Italy’s debt situation in a much better place than she found it, said JP Morgan’s Colombo.

“Maria is completing what has been a remarkable career,” he said. “Clearly, managing Italian sovereign debt has been a challenging task and, despite that, she has managed to take it to the next level. Under Maria’s management Italy’s average life of debt has been extended to close to seven years, while the average cost of debt has been lowered massively. The continuous hiccups Italy used to suffer due to the short term nature of its debt have been overcome thanks to the strategy Maria and her team have implemented.”

“The relationship Italy as an issuer has with the market has also improved thanks to Maria. She introduced the habit of having regular meetings and to roadshow across Europe, the US and other countries. She is a well-known and well-trusted face among market operators.

“Maria was tough with managing what is probably the second or third largest debt market. But she understood that in order to manage that stock of debt efficiently and safely, she needed to create a network of international investors and that diversifying across different product lines and tenors was key.”

Other bankers highlighted Cannata’s investor work as one of her strengths.

HSBC’s Gabizon added: “Maria is extremely respected. It goes without saying that she’s respected domestically, but she’s also hugely respected internationally. To some extent, she represents Italian debt and does so in a very professional way. All the building work on that has made the Italian curve a very important reference is really thanks to her, Davide and her team. It’s a very good thing for the country and that’s down to the professionalism she has shown and developed all these years.

“She’s always ensured there has been a fantastic government bond curve, both nominal and inflation linked, which are very important references. So she deserves many congratulations.”

On top of her investor relations work, Cannata has also been responsible for several other innovations in the market, added Citi’s Brown.

“Maria has, extremely successfully, managed the challenge of turning what is in a sense the ‘vice’ of a very large public debt into the virtue of the deepest and most liquid government bond market in the world — some would say more liquid than US Treasuries,” he said.

“The whole model for electronic trading of European government bonds was born and bred with Italian government bonds and Maria. Liquidity in euro government markets grew up in Italy. Italy was the model for the development of liquidity in euro government bond markets.”

Despite her long years and unique wealth of experiences, the woman leaving the Tesoro is little changed from the one that entered it in 1980, said JP Morgan’s Colombo.

“Maria graduated in mathematics from a very famous university [the Sapienza University of Rome] then started from the bottom, before forging a career to the top of the debt management office,” he said. “During that time she remained very humble, very amicable and very approachable. That is in stark contrast to some people who get to the top then forget where they came from and build a wall between them and the people who surround them. Maria has remained very simple, in a positive way.

“She has stayed very approachable, even in environments where events can make you harsh or tough. That she maintained her approachability is something I personally appreciate a lot.”

Tomorrow’s Tesoro

As well as ensuring there is a strong team to continue her work, Cannata never stopped planning for the future from an innovation standpoint, said bankers.

“Last year we were involved with the Republic of Italy’s debut 50 year benchmark,” said JP Morgan’s Colombo. “It was a great success and a justifiably long term view that Maria has always had in the management of the public debt.”

And she might be able to still be a sounding board for anyone needing to know the political outlook for Italy. This government and prime minister will probably be the last she serves under, with the next Italian general election looking set to fall in March, a month after she retires. But bankers and investors will in the meantime likely seek her views on the possible outcome of that vote.

“She has developed such a deep and loyal following among the world’s largest rates portfolio managers,” said Citi’s Brown. “I was once on a roadshow in Beijing with Maria, a few months before a major election in Italy. In answer to a question, Maria gave her view of what the outcome would be, which was far from certain at that time.

“Maria’s prediction and its impact on BTPs was far from being a consensus view, but I recall it matched very precisely what the outcome was a few weeks later. Her predictions have been more reliably accurate than many economists I follow. Investors across the globe have tremendous respect for her knowledge of both the Italian economy and the Italian political system. She will be hugely missed from that perspective. She’s been a phenomenal ambassador for the Republic of Italy on the global financial markets.”

But despite that insight, Cannata has always ensured that she has stayed out of politics — as any good civil servant should.

“Maria always refrained to enter the political debate,” said JP Morgan’s Colombo.
“She’s always been about the facts and the numbers, leaving the politics for the politicians to handle and just managing the situations she was presented with. She was a real civil servant in that sense.”

Fellow sovereign DMO heads echoed that view.

“Maria exemplifies everything about public service that you would hope to find in a finance ministry official: a wealth of experience, focus, objectivity and attention to detail,” said a sovereign debt manager at another European DMO. “Her many years in the Tesoro have added credibility to Italy’s profile in the international capital markets.”