Italy sold €12 billion of treasury bills today, meeting its target for the auction, and borrowing costs fell to the lowest since June from the previous sale.
The treasury sold €8.5 billion of 365-day bills at 2.230 per cent, the lowest since June 10th and down from 2.735 per cent at the last auction of similar-maturity securities on January 12th. Investors bid for 1.09 times the amount offered, down from 1.47 times last month.
The Treasury also sold €3.5 billion of 127-day bills at a rate of 1.546 per cent, down from 1.644 per cent last time.
While Italy has turned a cornerin pricing terms, the country is starting to become a victim of its own success, accoring to Nicholas Spiro, managing of Spiro Sovereign Strategy in London. "The dramatic fall in yields over the past several weeks has driven down borrowing costs to levels where demand is ebbing. Today's auction is an illustration of this," he said.
The Bank of Italy said a technical problem delayed its reception of purchase requests and may have affected the bid-to- cover ratio on the one-year bill sale, "which wasn't particularly brilliant", according to an e-mailed statement from the Rome- based central bank.
Italy, which needs to sell about €450 billion of debt this year, has benefited from the European Central Bank's efforts to fight the sovereign debt crisis by shoring up banks and propping up demand for government bonds. The Frankfurt-based institute loaned euro-region banks a record €489 billion for three years on December 21st to avert a credit crunch and has been purchasing Italian bonds since August.
The auction comes after Greek politicians approved spending cuts demanded by European finance chiefs, giving the indebted nation the chance of a financial lifeline and reducing investor demand for the safest assets.
Bloomberg
