EXCLUSIVE-Italy drops a customary spring sale of retail bond for the first time since 2012 - source

Elvira Pollina and Sara Rossi

time since 2012 - source@

MILAN, May 31 (Reuters) - Italy's Treasury has decided to skip the spring offering of its "BTP Italia" bond for the first time since it started selling this type of inflation-linked debt to small savers in 2012, a source with knowledge of the matter said.

The decision comes after an unsuccessful sale in November, when investor concerns over Italy's public finances under a populist government amid an escalating row with Brussels curbed ordinary Italians' demand for the bond.

Market tensions have heated up again ahead of a European Commission's decision next week over disciplinary steps against Italy for budget slippage. On Friday, the risk premium Italian bonds pay over safer German paper rose to a five-month high of nearly three percentage points.

Sources had told Reuters last week the Treasury was considering scrapping the sale given market turmoil and muted inflation sapping appetite for linkers.

In past the three years, Italy has offered the BPT Italia bonds twice a year, usually in April-May and October-November.

Asked for a comment, the Treasury told Reuters it remained committed to selling at least one new BTP Italia bond this year.

Rome introduced the BTP Italia bonds at the height of the euro zone debt crisis to tap large private wealth at home in the face of scant foreign demand for its debt.

These bonds have proved a success with both private and institutional buyers, leading to record-sized issues including a 22 billion euro single sale in 2013.

With the latest BTP Italia offer in November, the Treasury raised just 863 million euros from retail investors and 1.3 billion euros from institutionals. (Editing by Valentina Za)