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Italy 3-year Borrowing Costs Drop Sharply

Italy 3-year Borrowing Costs Drop Sharply

Italy's borrowing costs for three years fell to their lowest level in nearly two years at a debt auction on Thursday, just a day after Germany's top court approved the ratification of the euro area's permanent rescue fund.

The German approval added to the optimism generated by the European Central Bank's bond-buying announcement last Thursday, which has helped to lower Italy's bond yields.

The country also saw the yield drop and demand improve for its 15-year bond, which was also auctioned today for the first time in more than a year.

An auction of Italian treasury bills, held shortly after the German court ruling came, saw the country's borrowing costs decline sharply.

The Treasury raised the maximum target of EUR 4 billion from the sale of its July 2015 bond or BTP. The auction attracted bids totaling EUR 5.94 billion.

The yield on the 3-year debt dropped to 2.75 percent from 4.65 percent paid at an auction on July 13. It was the lowest yield paid since October 2010. The bid-to-cover ratio, which reflects demand, slid to 1.49 from 1.73 in July.

The country sold EUR 1.50 billion of its March 2026 BTP, matching the maximum target set for the sale. The auction drew EUR 2.25 billion bids.

The 15-year bond's yield fell to 5.32 percent from 5.90 percent paid in the previous sale in July 2011. Demand was 1.50 times the offer, broadly unchanged from last year's auction.

The Rome-based treasury also sold EUR 1 billion of a 15-year off-the-run BTP at yield 3.71 percent. Investors bid 1.85 times the offer.

The debt-to-GDP ratio would be sustainable and fall at some point for both Spain and Italy, if the countries successfully achieve their fiscal consolidation targets, the European Central Bank said in its monthly bulletin released Thursday.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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