Italy delivered more high yield bond issuance than any other country in the continental Europe through the first half of the year, as improved political stability drove investors to reassess historical risk perceptions
Italy’s high yield bond market thrived during the first half of the year, delivering a double-digit year-on-year increase in issuance, and standing in stark contrast to the broader market slowdown observed in Europe.
Italian high yield bond issuance was up by around 29%, climbing from US$11.2 billion in H1 2024 to almost US$14.4 billion through the first half of this year.
Overall Issuance by value Q1 2023 – Q2 2025
Instrument type: High yield bonds Use of proceeds: All
Location: Italy Sectors: All Sectors
The strong showing by the Italian market through the first six months of 2025 was a bright spot for an otherwise underperforming European high yield space. Across Western and Southern Europe, issuance in H1 2025 was down by 6% year-on-year. Indeed, Italy generated more high yield issuance than any other jurisdiction in continental Europe, including Germany and France, the bloc’s two biggest economies, in 2024 and through the first half of 2025.
Blockbuster June fuels recovery
The Italian high yield market benefitted from an especially strong second quarter, when issuance spiked to just under US$11 billion. This represented the second highest single-quarter total on Debtwire record, behind only the US$13.2 billion of issuance recorded in Italy in Q4 2017.
Two large issuances boosted the country’s H1 figures and demonstrated the high levels of investor confidence and appetite for Italian deal opportunities.
Milan-based fiber optic network developer FiberCop raised €2.8 billion in June, with industry media reporting that the issue was significantly oversubscribed and demand running to €6 billion. TeamSystem, the accounting software group backed by private equity firm Hellman & Friedman, also tapped the market in June, raising €1.75 billion.
Big-ticket issuance has been supplemented by a consistent flow of refinancing activity, which accounted for just under US$13.2 billion of issuance in the first half of the year. That sum already eclipses the full-year total recorded in 2024 (US$13 billion) and represents more than 90% of all issuance in Italy in H1 2025.
Since June 2024, the European Central Bank (ECB) has lowered borrowing costs eight times. This has encouraged issuers who raised capital through the upward rate cycle to return to the market and refinance at a lower cost of capital.
Stability reorients investor attitudes
The positive impact of a stable government has also helped support the positive sentiment in Italy’s high yield market.
Since her election in 2022, Prime Minister Georgia Meloni has led a settled administration that has stood in contrast to previous Italian governments, which had been shaped by fragile coalitions.
This period of political stability has coincided with cycles of flux in France and Germany, which has compelled investors to reassess Italy’s country risk. Historically, countries such as Italy have been classified as peripheral markets by global fixed income investors; but the stability of the Meloni government, in addition to business-friendly policies and a commitment to fiscal discipline, has blurred the boundary between Italy and the “safe” core European jurisdictions of France and Germany.
The spread between Italian and German government bonds has tapered to less than 1%, the narrowest gap since 2010. Italy’s credit rating has also improved, with S&P raising the country’s rating by one tier to BBB+ in April. Though high yield markets do not directly track ratings decisions and credit spreads in the sovereign bond market, the strength of the sovereign market has boosted investor confidence in Italy’s high yield ecosystem.
M&A is key to sustained growth
The outlook for Italian high yield activity for the rest of 2025 is broadly positive. Dealmakers anticipate further refinancing activity, even though the ECB has signaled that it may pause its rate cutting program, with inflation back to its 2% target.
Interest rates are now sitting well below the levels seen prior to June 2024, supporting a favorable environment for issuers to come to market and bring down borrowing costs. However, investors and issuers will also want to see steady refinancing deals complemented by an increase in M&A-related financing opportunities.
M&A activity remains subdued across Europe, with tariff uncertainty and persistent buyer-seller valuation gaps inhibiting dealmaking. Italian M&A has also been stuck in this limbo. After showing signs of recovery in Q4 2024 and Q1 of this year, total deal value dropped by 38% in Q2 as US tariff disruption inhibited global M&A markets.
However, even amid lingering tariff disruption, investors and issuers are anticipating a wave of M&A deal flow, particularly from European private equity firms, which had amassed a record €414 billion of dry powder by the end of 2024, according to industry body Invest Europe. Managers will only be able to hold out for so long before being obliged to put this capital to work.
Early signs of the positive impact of a potential increase in M&A on Italian bond issuance were observed in May, when a cluster of lenders lined up to sell around €2.5 billion of high yield bonds to finance Flutter Entertainment’s acquisition of Snaitech, Playtech’s Italian gambling business.
A series of other M&A deals through the second half of 2025 and into 2026 would provide a welcome boost to an already strong Italian high yield market. Such an influx of M&A-related financing would not only help to diversify issuance away from refinancing activity but also solidify Italy’s position as a core, stable market in Europe’s high yield space.
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