Tags: Italy | Bonds | Yields | Auction

Italy Sells $9 Billion of Bonds as Yields Fall at Auction

Thursday, 29 Dec 2011 07:26 AM

Italy sold 7 billion euros ($9 billion) of bonds and its borrowing costs fell in the country’s final debt sale of the year.

The Treasury in Rome sold 2.5 billion euros of bonds due in 2014, less than the 3 billion euro maximum for the sale, to yield 5.62 percent, down from 7.89 percent at the previous sale on Nov. 29. The Treasury priced 2.5 billion euros of its 5 percent 2022 bond to yield 6.98 percent, compared with 7.56 percent on Nov. 29. Italy also sold about 2 billion euros of bonds due 2021 and a floating-rate security due 2018.

The sale came one day after Italy auctioned 9 billion euros in treasury bills for 3.251 percent, about half the rate from the previous auction on Nov. 25 after the European Central Bank last week offered banks unlimited funds for three years.

The ECB’s measures “have clearly helped” and yesterday’s sale augurs well for today’s “more challenging auction of longer-term paper,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mail.

Prime Minister Mario Monti will probably outline new measures aimed at boosting growth in Europe’s third biggest economy that may include moves to open up closed professions, change labor laws to spur hiring and steps to lower fuel prices. The economy contracted 0.2 percent in the third quarter and probably also shrank in the three months through December, meaning Italy may have entered its fourth recession since 2001.

Yesterday’s auction was Italy’s first since the ECB loaned 489 billion euros to European banks in a bid to keep credit flowing to the 17-nation economy while lawmakers tackle the sovereign debt crisis. Italian lenders borrowed 116 billion euros as part of the tender on Dec. 21, according to a person with direct knowledge of the loans.

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