Medium and long-term auctions in mid December had decidedly positive results.
Three BTP were offered to the market: one on the run (the fifteen-year with maturity 1 August 2023) and two off the run (an ex ten-year, maturity 1 August 2014 and an ex five-year, maturity 15 April 2012).
For the 15 year bond, the amounts offered were between 750 and 1,500 million; the Treasury, having received bids for 2,394 million, decided to place 1,403 million, on conditions more favourable than the average of listings on the secondary market (-4 basis points in yield terms).
For the other two BTP, the total amount offered was between 1,500 and 2,500 million; the Treasury decided to allocate 1,447 million 1 August 2014 BTP, having received bids for 2,263 million, and 999 million 15 April 2012 BTP, having received bids for 1,831 million. Here too the amount allocated was close to the range maximums and at more favourable prices when compared to the market; the bonds were in fact issued with yields 2.7 and 4 basis points lower respectively than the average levels on the secondary market.
What is amazing is that the MF confuses the auctions mentioned above with the additional allocations reserved to state bond specialists, who, up until 15.30 on the day following the auction, can underwrite – at the allotment price – a percentage of the amount offered in the said auction (10% in this case). This, therefore, is a placing at a fixed rate, which the specialists can take advantage of at their sole discretion; the Treasury places no reliance on the potential coverage that could result from it when planning issuances (though taking it into account, of course, in gauging the amounts of subsequent issuances).
An additional allocations retrospective would clearly demonstrate that they are 'optional' and at the discretion of the specialists; it is by no means rare in fact for there to be no offers to underwrite in an additional allocation, even where market conditions are particularly favourable.
Additional allocations, it should be pointed out, have been been taking place since 1994, legally in the form of 'tranches' independent of issuance bonds.