Italy auctioned 7.02 billion euros ($9 billion) of bonds, falling short of the target, as borrowing costs declined in its final debt sale of the year.
The Treasury in Rome sold 2.5 billion euros of securities due in 2014, less than the 3 billion euro maximum for the sale, to yield 5.62 percent, down from 7.89 percent at the previous sale on Nov. 29. The Treasury priced 2.5 billion euros of its 5 percent 2022 bond to yield 6.98 percent, compared with 7.56 percent on Nov. 29. Italy also sold about 2 billion euros of bonds due 2021 and a floating-rate security due 2018.
The sale, which aimed to raise 8.5 billion euros, came one day after Italy auctioned 9 billion euros in treasury bills for 3.251 percent. That was about half the rate from the previous auction on Nov. 25 after the European Central Bank last week offered euro-area banks unlimited funds for three years.
“This is not a bad result at all as demand has held up and the yield on the three-year note has fallen markedly,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said by phone from London. Still, “market pressure is unlikely to abate” because while “the ECB’s new three-year liquidity measures have provided a fillip to Italy’s short-term debt market, they do little to address underlying concerns about creditworthiness.”
Market Reaction
Italian 10-year bonds (.IT10) stayed lower after the auction. The 10-year yield climbed 12 basis points to 7.12 percent at 10:33 a.m. London time. Three-year yields pared declines, dropping 4 basis points to 5.83 percent. They earlier fell to 5.68 percent. The euro weakened to a decade low against the yen after the auction, while European shares were little changed and U.S. equity-index futures gained.
Prime Minister Mario Monti held a press conference that began noon in Rome. He may outline measures aimed at boosting growth, including moves to open up closed professions, ease labor regulations and lower fuel prices. The economy contracted 0.2 percent in the third quarter and probably also shrank in the three months through December, meaning Italy may have entered its fourth recession since 2001.
Yesterday’s auction was Italy’s first since the ECB loaned 489 billion euros to European banks in a bid to keep credit flowing to the 17-nation economy while lawmakers tackle the sovereign debt crisis. Italian lenders borrowed 116 billion euros as part of the tender on Dec. 21, according to a person with direct knowledge of the loans.
The Treasury in Rome sold 2.5 billion euros of securities due in 2014, less than the 3 billion euro maximum for the sale, to yield 5.62 percent, down from 7.89 percent at the previous sale on Nov. 29. The Treasury priced 2.5 billion euros of its 5 percent 2022 bond to yield 6.98 percent, compared with 7.56 percent on Nov. 29. Italy also sold about 2 billion euros of bonds due 2021 and a floating-rate security due 2018.
The sale, which aimed to raise 8.5 billion euros, came one day after Italy auctioned 9 billion euros in treasury bills for 3.251 percent. That was about half the rate from the previous auction on Nov. 25 after the European Central Bank last week offered euro-area banks unlimited funds for three years.
“This is not a bad result at all as demand has held up and the yield on the three-year note has fallen markedly,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said by phone from London. Still, “market pressure is unlikely to abate” because while “the ECB’s new three-year liquidity measures have provided a fillip to Italy’s short-term debt market, they do little to address underlying concerns about creditworthiness.”
Market Reaction
Italian 10-year bonds (.IT10) stayed lower after the auction. The 10-year yield climbed 12 basis points to 7.12 percent at 10:33 a.m. London time. Three-year yields pared declines, dropping 4 basis points to 5.83 percent. They earlier fell to 5.68 percent. The euro weakened to a decade low against the yen after the auction, while European shares were little changed and U.S. equity-index futures gained.
Prime Minister Mario Monti held a press conference that began noon in Rome. He may outline measures aimed at boosting growth, including moves to open up closed professions, ease labor regulations and lower fuel prices. The economy contracted 0.2 percent in the third quarter and probably also shrank in the three months through December, meaning Italy may have entered its fourth recession since 2001.
Yesterday’s auction was Italy’s first since the ECB loaned 489 billion euros to European banks in a bid to keep credit flowing to the 17-nation economy while lawmakers tackle the sovereign debt crisis. Italian lenders borrowed 116 billion euros as part of the tender on Dec. 21, according to a person with direct knowledge of the loans.
