Bloomberg News

Italy Sells of 750 Million Euros of Inflation-Linked Bonds

October 27, 2011

Oct. 27 (Bloomberg) -- Italy sold 750 million euros ($1.05 billion) of inflation-linked bonds, one day after Prime Minister Silvio Berlusconi was urged by euro-area leaders to pursue an “ambitious timetable” to boost economic growth and cut debt.

The Rome-based Treasury sold the bonds due in September 2021 to yield 4.61 percent, up from 4.07 percent at the last auction of the same securities on July 27. Demand was 2.14 times the amount on offer, compared with 1.69 in July.

Italy will sell as much as 8.5 billion euros of four different bonds including a benchmark three-year security tomorrow.

Italy sold yesterday 10.5 billion euros of bills and bonds with borrowing costs on the shorter-term securities rising to a three-year high as concerns over the euro-area debt crisis spread. The auction came hours after European Union leaders wrapped up a summit in Brussels, where Berlusconi presented a letter outlining a plan to boost Italian growth and restrain a debt load of more than $2 trillion by selling assets, raising the retirement age and easing firing rules.

The European Central Bank started buying Italian debt on Aug. 8 to tame borrowing costs after yields surged to euro-era records. The premium investors demand to hold Italy’s 10-year bond instead of German bunds narrowed 19 basis point from yesterday’s close to 369 basis points as of 11:17 a.m. in Rome. The yield on the country’s 10-year bond was 5.80 percent.

The country’s bond yields remain at “very high levels,” which could be reduced through prompt implementation of all required reforms, Bank of Italy Governor and incoming ECB President Mario Draghi said in a speech in Rome yesterday. Draghi also called Berlusconi’s letter to the EU leaders an “important step.”

--Editors: Jeffrey Donovan, Jerrold Colten

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

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


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