* Italy aims to extend debt maturity to seven years - debt chief
* Italy still offering positive yields on medium term issuances
* Spread between German and Italian 10-year bond at 2016 low
ROME, Jan 11 (Reuters) - Italy’s debt is drawing growing interest from Asian investors who are hunting for rare positive returns among negative-yielding euro zone government bonds, Italian debt chief Davide Iacovoni said on Monday.
“We’re clearly witnessing renewed interest for Italy’s debt from foreign investors, especially from Asia, where buyers had been sitting on the fence for a long time, Iacovoni told Reuters in an interview.
Despite record-low interest rates, investors are betting that the European Central Bank’s purchases will continue to support the euro zone’s government bond market this year.
Unlike core issuers such as Germany and France, or fellow second-tier countries like Spain, Italy offers positive yields on maturities longer than five years.
Iacovoni said Rome had registered a more positive attitude towards Italy’s debt since August and September among Japanese pension funds, large Asian sovereign funds and several central banks in the region.
Italy was the first Western country hit last year by the coronavirus pandemic, forcing the government to massively step up borrowing to support its already fragile economy.
The European Central Bank’s purchases are keeping borrowing costs in check even as Rome’s debt is seen rising towards 160% of gross domestic product, the highest in the euro zone after that of Greece.
The 10-year yield spread between Italy and Germany , a key measure of the appetite for the riskier Italian bonds, fell on Friday to around 100 basis points, its narrowest since 2016.
Last week, Italy sold 10 billion euros of a new 15-year bond through a group of banks, drawing 105 billion euros in orders from around 520 investors, of which nearly three quarters were from abroad.
Iacovoni said these foreign buyers included Asian and European central banks from outside the European Union.
The issue was priced to yield less than 1%.
“The Investors I met said it would be hard now for them to explain why not to buy Italy”, Iacovoni said. “Our market is huge but also very liquid. This is much appreciated by international investors.”
Rome sold bonds worth nearly 551 billion euros in 2020 and the Treasury’s expectation is that this year’s issuance will be similar.
The government is now considering a new stimulus package worth 24 billion euros, Economy Minister Roberto Gualtieri said on Sunday.
The Treasury aims to extend Italy’s average debt maturity to seven years in 2021, Iacovoni said. That would compare with 6.95 years in 2020 and 6.87 in 2019.
The marginal cost of debt decreased to 0.59% in 2020 from 0.93% last year.
“We should be able to consolidate that result in 2021”, Iacovoni added.
Unicredit expects Italy’s 2021 average cost of debt compared with the outstanding stock could fall to 2.10% to 2.15% from 2.40% in 2020.
“I consider that a bit optimistic, but we expect to go below 2.4%”, Iacovoni said.
Reporting by Stefano Bernabei;, editing by Valentina Za, Larry King