Bloomberg News

Italy Sells 11.5 Billion Euros of Bills as Demand Diminishes

September 12, 2011

(Updates with yield on 10-year bonds in sixth paragraph.)

Sept. 12 (Bloomberg) -- Italy sold 11.5 billion euros ($15.6 billion) of Treasury bills as demand waned and borrowing costs rose amid Europe’s sovereign-debt crisis.

The Rome-based Treasury sold 7.5 billion euros of one-year bills at an average yield of 4.153 percent compared with 2.959 percent the last time securities of similar maturity were sold on Aug. 10. Demand was 1.53 times the amount on offer, compared with 1.94 times at the previous sale.

The Treasury also sold 4 billion euros of 3-month bills. The yield was 1.907 percent, up from the 1.034 percent the last time such securities were sold on March 10. The bid-to-cover ratio was 1.86, compared with 2.42 at the previous sale.

Italy’s borrowing costs have dropped from a euro-era high since the European Central Bank began buying the nation’s debt on Aug. 8. The yield on the benchmark 10-year bond has fallen more than 100 basis points since reaching a record 6.4 percent Aug. 4 on concern Italy would become the next victim of the region’s debt crisis.

Today’s auction comes as the Chamber of Deputies prepares to give final approval this week to a 54 billion-euro austerity package. The plan, passed by the Senate last week, was first announced on Aug. 5 in exchange for the ECB bond purchases.

The extra yield investors demand to hold Italian 10-year bonds over benchmark German bunds rose nine basis points to 372 basis points as of 10:29 a.m. in Rome, compared with a euro-era record of 416 basis points on Aug. 5.

Italy still faces 75 billion euros of maturing bills this year and needs to sell about 80 billion euros of bonds to pay for redemptions and the budget deficit. The biggest test comes this month when about 46 billion euros of bonds mature.

--Editor: Jennifer M. Freedman

To contact the reporter on this story: Jeffrey Donovan in Rome at jdonovan26@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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