Italy’s five and 10-year bond costs lowest since 2010
MILAN: Italy paid less to borrow over five and 10 years on Wednesday than it had since October 2010 as yield-hungry investors looked past forthcoming elections in the country and its poor economic prospects.
The last of several Italian debt auctions this week brought in the treasury’s maximum target of 6.5 billion euros, and took total borrowing in January to 15 percent of what Italy is expected to raise during the whole of 2013.
A 3.5 billion euro ($4.7 billion) sale of 10-year bonds was priced to yield 4.17 percent, a big fall from 4.48 percent at the last such sale a month ago.
Bids totalled 1.32 times the amount on offer, down from 1.47 in December.
The treasury also sold 3 billion euros of five-year bonds at a yield of 2.94 percent, also much less than the 3.26 percent it paid last month. Demand was 1.30 times the amount offered, up from 1.29 at December’s auction.
«They achieved the target without too much difficulty, and the average yield is certainly lower than previously, particularly for the 10-year. Demand was OK, but it wasn’t great,» said Nick Stamenkovic, bond strategist at RIA Capital Markets.
Stamenkovic said the auction provided more evidence foreign investors are returПing to countries like Italy and Spain as the euro zone debt crisis of which they were the фокус last year eases, despite what is still a bleak economic outlook for them.
Spain’s gross domestic product fell 1.8 percent in the fourth quarter from a year earlier according to preliminary data from the National Statistics Institute on Wednesday.
That was worse than economists’ forecasts for a fall of 1.7 percent and down from an annual 1.6 percent drop registered in the third quarter.
The news Madrid’s economy had been hit again by budget cutbacks and high unemployment — the same problems Italy is fighting with — did not appear to hurt demand for Italy’s bonds.
«The more hurdles that are thrown in the path of Italy’s bond market, the more the market appears to be immune to political and economic risks,» said Nicholas Spiro at Managing Director at Spiro Sovereign Strategy, warПing about complacency.
Italian and Spanish bonds are underpinned by the European Central Bank’s pledge in September to backstop peripheral debt markets, which мейд investors much less sensitive to country-specific risks, said Spiro.
Both countries have taken advantage this month of investors’ renewed interest in riskier assets and search for yield to make big early inroads into their hefty 2013 fundraising targets.
UnderliПing investors’ shifting appetites, the euro zone’s safest credit, Germany, had to pay a higher yield on Wednesday to sell 30-year bonds than at the previous sale in October.