Bloomberg News

Italy’s Borrowing Costs Drop as Government Meets Target

May 11, 2012

Italy sold 10 billion euros ($13 billion) of Treasury bills, meeting its target as rates fell from the previous auction.

The Rome-based Treasury sold 7 billion euros of 364-day bills at 2.34 percent, down from 2.84 percent at the last sale of similar-maturity debt on April 11. Investors bid for 1.79 times the amount offered, up from 1.52 times last month. Also sold were 3 billion euros of 3-month bills at 0.865 percent, compared with 1.249 last month.

Prime Minister Mario Monti is implementing 20 billion euros in spending cuts and tax increases to erase the budget gap and tame a 1.9 trillion-euro debt. Ten-year borrowing costs fell more than 2 percentage points between Monti’s appointment in November and early March as demand for the nation’s debt was bolstered by European Central Bank lending and the premier’s efforts to spur the euro region’s third-biggest economy.

Today’s sale “offers a measure of reassurance, but needs to be backed up by a solid bond auction on Monday,” Nicholas Spiro, London-based managing director of Spiro Sovereign Strategy, said in an e-mail. Italy will auction as much as 5.25 billion euros of bonds on May 14.

Political deadlock in Greece and Spain’s fiscal woes have helped reignite the region’s debt crisis amid waning impact from the ECB’s long-term refinancing operation, or LTRO. The yield on Italy’s 10-year bond was 5.50 percent at 12:39 p.m. in Rome, up from 4.80 percent on March 8, which was the lowest since Monti took office on Nov. 16.

“Market perception-wise, Italy is faring better than Spain, but is still paying more to get its debt out the door,” Spiro said. “This is a post-LTRO trading environment.”

To contact the reporters on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net Jerrold Colten at jcolten@bloomberg.net


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