Bloomberg News

Italy Sells $10.77 Billion in Bonds as Borrowing Costs Rise

September 29, 2011

(Updates with strategist’s comment in fourth paragraph. For more on the euro crisis, click on EXT4 <GO>.)

Sept. 29 (Bloomberg) -- Italy sold 7.9 billion euros ($10.77 billion) in bonds, less than the maximum target, as borrowing costs rose amid contagion from Europe’s debt crisis.

The Rome-based Treasury sold 3.14 billion euros of bonds due in 2014 to yield 4.68 percent, compared with a yield of 3.87 percent at the last auction on Aug. 30. Demand was 1.36 times the amount sold, compared with 1.32 times at the last sale. Also sold were 2.47 billion euros of 2022 bonds to yield 5.86 percent, compared with 5.22 percent on Aug. 30.

The Treasury also auctioned 1.3 billion euros of 2021 bonds to yield 5.49 percent, and 926 million euros in floating-rate 2015 bonds to yield 5.63 percent. Italy planned to sell as much as 9 billion euros in bonds.

“Today’s auction was not strong at all,” Annalisa Piazza, a fixed-income strategist at Newedge Group SA in London, wrote in a note to investors. “Market participants don’t seem to bet on a solid recovery” in Europe’s peripheral economies “any time soon.”

Italy’s borrowing costs surged to euro-era records last month as Greece’s slide toward default fueled concern the country with the region’s second-biggest debt would become the next victim of the sovereign crisis. The European Central Bank began buying Italian securities on Aug. 8 and bonds have since given back much of the initial gains triggered by the purchases.

The yield on Italy’s benchmark 10-year bond rose 1 basis point to 5.656 percent as of 12:05 p.m. in Rome, pushing up the premium investors demand to hold the security over equivalent- maturity German bunds to 368 basis points. That compares with 363 basis points yesterday and a euro-era record close of 398 basis points on Sept. 21.

Italy sold 750 million euros of inflation-linked bonds yesterday. Investors offered 2.1 times the amount of the securities on offer. The country still has almost 90 billion euros in bills and longer-term debt maturing this year.

--Editors: Jeffrey Donovan, Andrew Atkinson

To contact the reporter on this story: Chiara Vasarri in Rome at asarri@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net.


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