December 3, 2018 / 2:27 PM / 8 days ago

UPDATE 1-Italy considers buybacks or exchanges on government bonds before year-end -sources

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MILAN, Dec 3 (Reuters) - Italy’s Treasury is considering whether to exchange or buy back government bonds to lower the amount of debt maturing in certain months of next year, two sources said on Monday.

Italy needs to raise around 400 billion euros ($453 billion) in 2019 to refinance maturing debt and cover for new spending, as the European Central Bank prepares to withdraw support by ending its bond-buying programme by the end of this month. .

Bond maturities for next year will top 20 billion euros in the months of February, March, May and October, while standing at over 40 billion euros in September.

“The Treasury is working on something to smoothen 2019 maturities given that market volatility has come down and market conditions for Italian debt have improved in recent sessions,” one of the sources said.

“Spain and France will offer their debt later this week, so there is an opportunity now for the Italian Treasury.”

Italy’s borrowing costs fell to their lowest level in just over two months on Monday after media reports said Rome was negotiating with the European Commission to reduce its 2019 budget deficit target to 2.0 percent of GDP or even below.

In November and December of last year, the Italian Treasury carried out six exchange and buyback operations on government bonds. Rome has also performed three exchange operations so far this year, one in April and two in October.

“We expect more of this shortly,” the source added.

A second source said he expected “buybacks rather than exchanges before year-end”.

“I expect the Treasury to focus such operations on those months of 2019 where redemptions will peak,” the person added.

The Treasury declined to comment.

$1 = 0.8822 euros Reporting by Elvira Pollina and Giulio Piovaccari; Editing by Andrew Cawthorne

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