BLBG:Italy’s Borrowing Costs Drop to Two-Year Low at Bond Auction
Italy sold three-year bonds at the lowest rate in more than two years and the Treasury took advantage of growing demand for the country’s debt to auction securities with a maturity longer than 15 years.
The Rome-based Treasury sold 3.5 billion euros ($4.5 billion) of its benchmark three-year bond to yield 2.64 percent, less than the 2.86 percent at the last auction of the same securities on Oct. 11. Investors bid for 1.5 times the amount offered, down from 1.67 times last month. The Treasury also auctioned 1.5 billion euros of debt due in 2023 and one in 2029, the first sale of a security with a maturity of more than 15 years since May 2011.
Foreign investors have been returning to the Italian debt market in recent months after European Central Bank President Mario Draghi pledged to do whatever it takes to defend the euro and then announced a program to buy bonds of countries struggling to bring down borrowing costs. Italy’s 10-year bond yield has fallen more than 160 basis points since Draghi first made his pledge on July 26.
“The resilience of Italian debt to the recent deterioration in market sentiment is quite remarkable and stems entirely from the signalling effect of the ECB’s new bond-buying programme,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “This is the longest period of relative calm in Italy’s bond market since the crisis erupted in July 2011.
The Treasury sold the 2023 and 2029 bonds to yield respectively 4.81 percent and 5.33 percent. Demand was 1.51 times the amount offered on the 2023 bond and 1.48 times on the 2029 bond.
Italy’s 10-year bond yield fell 1 basis point to 4.96 percent at 11:29 a.m. in Rome, leaving the difference with comparable maturity German bunds at 359.6 basis points.
The auction came after the Treasury sold 6.5 billion euros of one-year bills yesterday to help pay for 5.5 billion euros in bills maturing tomorrow. The Treasury faces almost 35 billion euros in additional bill maturities this year and has one bond coming due next month worth 18.7 billion euros.
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;
