Bloomberg News

Italy Sells 10.5 Billion Euros of Debt, Borrowing Costs Rise

October 26, 2011

(Updates with Draghi’s comments in sixth paragraph, Berlusconi’s letter to leaders in eighth.)

Oct. 26 (Bloomberg) -- Italy sold 10.5 billion euros ($14.6 billion) of bills and bonds with borrowing costs on the shorter- term securities rising to a three-year high as debt-crisis concerns spread.

The Rome-based Treasury sold 8.5 billion euros of 182-day bills to yield 3.535 percent, the highest since September 2008 and up from 3.071 percent at the last auction of similar- maturity debt on Sept. 27. Demand was 1.57 times the amount on offer, compared with 1.74 times last month.

Italy also sold 2 billion euros of 2013 zero-coupon bonds to yield 4.628 percent, up from 4.511 percent at the last auction of similar securities on Sept. 27. Demand was two times the amount on offer, compared with 1.57 last month.

The Treasury sold the maximum set for the sale for both securities.

The auction comes after European Union leaders on Oct. 23 turned up the heat on Italian Prime Minister Silvio Berlusconi to speed up an overhaul of public finances and restrain its debt load of more than $2 trillion, about 120 percent of gross domestic product.

Italy’s bond yields remain at “very high levels,” which could be reduced quickly through prompt implementation of all required reforms, incoming European Central Bank President Mario Draghi said in a speech in Rome today.

European leaders meet again in Brussels today for a second summit in four days to hammer out a comprehensive plan for tackling the euro-area debt crisis.

Berlusconi and Umberto Bossi, his Northern League ally, agreed last night to send a letter to the EU before today’s summit explaining a plan to increase the retirement age to 67.

The ECB started buying Italian bonds on Aug. 8 to curb borrowing costs as yields surged. The premium investors demand to hold Italy’s 10-year bond instead of German bunds narrowed 2 basis point to 387 basis points at 1:00 p.m. in Rome. The yield on the country’s 10-year bond was 5.95 percent.

--Editors: Andrew Atkinson, James Hertling

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

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


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