Italy and Spain auction bonds

European stocks and US index futures rose as Spain sold almost double the amount planned and Italy's borrowing costs declined at debt sales today.

Spain sold €9.98 billion of bonds maturing in 2015 and 2016, including a new three-year benchmark security, twice the maximum target of €5 billion set for the sale.

Demand for the new three-year benchmark bond was 1.8 times the amount sold, compared with a bid-to-cover of 2.7 the last time securities of a similar maturity were sold on December 1st, the Bank of Spain said.

The yield on the new benchmark, which matures in July 2015, was 3.384 per cent, compared with 5.187 per cent when Spain sold notes maturing in April 2015 at an auction in December.

Italy also fared well, paying less than half what it did a month ago to sell one-year bills at its first auction of 2012.

The yield on Italian 12-month bills fell to 2.735 per cent, from the near 6 per cent yield Italy paid to sell one-year paper at a mid-December auction. It was the lowest since June 2011.

Italy will launch its 2012 bond issuing campaign on Friday when it offers up to 4.75 billion euros of debt including its three-year benchmark and two off-the-run issues.

Both auctions, which were seen as a key indicator of investor sentiment, served to lift markets this morning, ahead of an ECB interest rate decision later today.

The yield on the Spanish two-year note dropped to less than 3 per cent for the first time since April 2011, with the extra yield investors demand to hold Italian 10-year bonds instead of benchmark German bunds slipping 30 basis points.

The Stoxx Europe 600 Index gained 0.7 per cent points at 10:10 a.m. in London. Standard and Poor's 500 Index futures added 0.4 per cent.

Reuters/Bloomberg