Bloomberg News

Italy Sells Zero Coupon Bonds at Lowest Yield Since March

October 26, 2012

Italy sold 3 billion euros ($3.9 billion) of zero-coupon bonds, the maximum set for the auction, at the lowest yield since March 27 as prospects for European Central Bank market support prompts investors to return to higher-risk assets.

The Rome-based Treasury sold the 2014 zero-coupon bonds to yield 2.397 percent, less than the 2.532 percent at the last auction of the same securities on Sept. 25. Investors bid for 1.65 times the amount offered, the same as last month.

Italy also sold 674 million euros of 2.1 percent inflation- linked 2021 bonds and 326 million euros of 3.1 percent inflation-linked 2026 bonds today.

Spanish and Italian bond yields have declined since ECB President Mario Draghi vowed in July to do what’s needed to preserve the euro and followed in September by announcing a bond-buying program for countries facing financing stress. Speculation Greece will get additional funding, coupled with the International Monetary Fund’s decision this week to release a 1.5 billion-euro loan installment to Portugal, has spurred investors to move to riskier assets.

Greece will get a loan of as much as 20 billion euros to supplement its second rescue package, Handelsblatt reported yesterday, citing a memorandum of understanding between the European Commission, the ECB and IMF. The loan plan allows Greece an extra two years until 2016 to meet its deficit target, the German newspaper said.

Italy plans to reduce the amount of short-term debt it auctions during the rest of the year after the sale of a retail bond last week attracted 18 billion euros of orders, more than the previous two sales combined, a Treasury official said Oct. 22.

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

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net;


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