Italy sold €5.87 billion of five- and 10-year bonds yesterday at auction at rates close to two-year lows as investors appeared to shrug off worries over the country’s political future after Mario Monti’s resignation last week as prime minister.
The treasury sold the maximum €3 billion of bonds due in 2022 at 4.48 per cent, slightly higher than the 4.45 per cent it paid last month. It also sold €2.871 billion of bonds due in 2017, slightly below its maximum target, at 3.26 per cent, versus 3.23 per cent at the last auction in November.
While the cost of borrowing rose slightly for Italy, the rate paid is still well below where it was a year or even six months ago. This time last year benchmark Italian 10-year debt was hovering close to 7 per cent amid fears over the potential break-up of the euro zone.
In secondary trading, yields on 10-year Italian debt were down just 1 basis point by late morning, while yields on the equivalent benchmark Spanish debt were little changed at 5.287 per cent.
Analysts said yesterday’s auction was slightly more reflective of investor sentiment towards the euro zone periphery than a sale of six-month bill and two-year notes held on Thursday in which the treasury raised the maximum €11.75 billion targeted. However, with many people still on holiday after Christmas, trading remains thin.
Yields on peripheral debt have fallen considerably since Mario Draghi, president of the European Central Bank, said he would do “whatever it takes” to save the euro. The ECB’s pledge to buy the sovereign debt of ailing euro zone countries has reduced the risk of a euro zone break-up.
– Copyright 2012 The Financial Times Limited
