Italy Auctions €7B in Long-Term Debt as Yields Fall

Borrowing costs declined on Thursday in Italy’s final debt sale of the year at which auctioned 7.02 billion euros of bonds, falling short of targets.

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

Italy had aimed to raise 8.5 billion euros in today’s auction of longer-term debt, which came one day after the Treasury auctioned 9 billion euros in shorter-term bills at a 3.251 percent rate — about half the rate from the previous auction on November 25. The European Central Bank last week offered euro-zone banks unlimited funds for three years.

“The ECB’s new three-year liquidity measures have provided a fillip to Italy’s short-term debt market,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. However, “they do little to address underlying concerns about creditworthiness.”

After the auction, the yield on 10-year notes climbed 12 basis points to 7.12 percent at 10:33 a.m. London time. Three-year yields fell 4 basis points to 5.83 percent, but fell as low as 5.68 percent earlier in the day. The euro weakened to a decade low against the Japanese yen.

Yesterday’s auction was Italy’s first since the ECB last week loaned European banks 489 billion euros in a bid to keep credit flowing to the euro economy. Italian lenders borrowed 116 billion euros as part of the tender on December 21, according to a person with knowledge of the loans.

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