Italian borrowing costs dropped at an auction of 6.5 billion euros ($8.3 billion) of one-year Treasury bills as maturing debt left investors with cash to spend on the new securities.
The Treasury in Rome sold the 364-day bills at 1.762 percent, down from 1.941 percent at the last auction on Oct. 10. Investors bid for 1.76 times the amount of bills offered today compared with 1.77 times last month. Italy returns to the market tomorrow with the sale of as much as 5 billion euros of longer maturity-debt.
The Treasury will pay out 5.5 billion euros on maturing bills on Nov. 15, giving investors funds to repurchase Italian securities. The Treasury also dropped plans to sell three-month bills today after taking in more than 18 billion euros from the sale of bonds to retail investors last month, easing the country’s financing needs for the rest of the year.
Italy’s 10-year yield rose 2 basis points to 5.049 percent at 11:09 a.m. in Rome, pushing the difference with comparable- maturity German debt to 372.3 basis points. Most bonds in Europe gained today after European finance chiefs yesterday granted Greece an additional two years to meet its deficit reduction goals.
“Since the last 12-month bill auction, investors have become more cautious on the periphery mainly due to Greek woes and volatile expectations regarding Spain’s request for aid,” Elia Lattuga, fixed income strategist at UniCredit SpA in Milan, wrote in a note to investors yesterday.
Italy’s bond yields have been rising for the past month as investor expectations that Spain would quickly seek a bailout dissipated. The Spanish 10-year yield rose to the highest level in a month today as the government in Madrid continues to resist an aid request.
A Spanish bailout should be “positive” for Italian yields “in the medium term,” Italy’s debt agency head Maria Cannata said in an interview with Bloomberg Television in Rome yesterday.
Italy has no need to tap the European rescue fund, Prime Minister Mario Monti said yesterday.
-- Editors: Andrew Davis, Dan Liefgreen
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