Italy Explores Buying MTS Bond Market to Ensure Debt Control

Italy is considering buying back European bond-trading platform MTS SpA from Euronext NV, as Prime Minister Giorgia Meloni seeks to preserve national oversight of the country’s debt.

State lender Cassa Depositi e Prestiti SpA would be the potential buyer, according to people familiar with discussions who spoke anonymously to describe the private talks. The firm would buy Euronext’s 63% share of MTS, which was founded specifically to bolster Italy’s bond liquidity. The remaining 37% of MTS is held by other shareholders.

One potential hitch could be the cost, the people said. The Euronext stake is valued at roughly €600 million ($671 million).

The discussions reflect Meloni’s anxiety about losing national control over key elements of Italy’s economy — especially bond markets — as the European Union promotes market integration. While Meloni broadly supports further linking Europe’s economies, she has pressed to keep some oversight at home to supervise Italy’s high debt loads. Europe’s recent bond market turmoil has only strengthened that desire.

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Spokespeople for Cassa Depositi and Meloni’s office declined to comment, while a Euronext spokesperson said it “does not comment on market rumors or speculation.”

“MTS is a strategic asset within Euronext’s business, and we remain fully committed to its continued development as part of the Euronext Group,” the Euronext spokesperson added.

Italy’s push for local oversight is running into a proposed EU regulation that would let financial firms like Euronext deal with one EU regulator — ESMA, the European Securities and Markets Authority — instead of each national watchdog where they operate.

The rules would let Euronext do business under one license as a PEMO, or Pan-European Market Operator, removing the need to establish itself and seek regulatory approval in separate countries.

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The potential changes have rung alarm bells in certain Italian government circles that would prefer MTS — the main regulated wholesale market for Italian government bonds — stay under national control, the people said. Concern about Italian bond management is partly why Rome fought hard to win the appointment of Italian Carlo Comporti as head of ESMA, but buying back the platform is also being considered as a further guarantee, they added.

The fear is that removing MTS from national regulators’ control could be a risk for Italian government bond liquidity.

Italy has historically been careful about its debt management strategies, given it carries one of Europe’s largest debt loads at over 130% of economic output. With the spread between Italian 10-year bonds and comparable German securities, a measure of risk, widening in the past month, concerns about bond sales and keeping liquidity high has increased.

MTS was founded in 1988 to help stabilize Italy’s bond markets. To ensure liquidity, the big players agreed to constantly post buy and sell prices, meaning any investor wanting to buy or sell could always find a trading partner.

Initially, MTS was a cooperation of the Italian Treasury, the Bank of Italy and other market intermediaries. But in the late 2000s, it became part of the London Stock Exchange after its acquisition of the Italian stock exchange Borsa Italiana. In 2021, Euronext acquired Borsa Italiana, making MTS part of that European stock exchange group.

Since then, there’s been occasional talk about bringing MTS back under government control, though nothing congealed in part due to costs.

Meloni has long been known for her strong nationalist stance on management and control of Italian bonds. She is keen to avoid any hint of a debt crisis, remaining scarred by the financial tumult that felled her political mentor, Silvio Berlusconi, Bloomberg previously reported.

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For instance, when insurer Assicurazioni Generali SpA proposed combining its asset-management business with France’s Natixis Investment Managers, the Italian government expressed reservations. It argued that ownership of the insurer, which controls Italian household savings and invests in Italian government bonds, was strategically important for the country. The deal never went through.

Cassa Depositi Chief Executive Officer Dario Scannapieco has in the past described MTS as systemic infrastructure whose governance needs appropriate safeguards. CDP currently owns about 8% of Euronext — an investment that was framed as needed to keep an Italian role in the institution.