Tags: Italian Bond Yields Fall in Key Debt Auction

Italian Bond Yields Fall in Key Debt Auction

Tuesday, 28 Feb 2012 09:32 AM

Italy's 10-year borrowing costs fell to their lowest level since August at a bond sale on Tuesday as large reinvestment flows and the prospect of more cheap European Central Bank liquidity helped Rome sell the top planned amount of bonds.

Italy sold 6.25 billion euros ($8.40 billion), including a new Sept. 2022 BTP bond. The auction yield fell to 5.50 percent from 6.08 percent at the end of January. Demand for the 10-year issue totaled 1.4 times the 3.75 billion euros sold, in line with the much smaller January sale.

The Treasury also sold a new tranche of a five-year bond due in May 2017 at an average 4.19 percent yield, the lowest since May. It last paid 5.39 percent to sell five-year debt at the end of January.

Italian banks are expected to largely tap a new offer of three-year ECB funds on Wednesday, after ECB data showed on Monday they stepped up their purchases of government bonds in January by a record amount following the first ECB tender on Dec. 21.

While the ECB cash is more likely to find its way into short-dated bonds, it has generally improved the market climate and also helped the longer end of the curve where funding conditions remain more challenging.

© 2017 Thomson/Reuters. All rights reserved.

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