Italy Index-Linked Bonds May Drop Before Treasury Auction, Barclays Says

Italian 10-year inflation-linked bonds, yielding close to the most on record, may weaken further before a sale of the securities today, Barclays Plc said.

“The sector and the auction stock have seen significant concession on the curve ahead of the tap,” strategists including Alan James, head of inflation-linked bond research in London, wrote yesterday in an investor note. “This seems necessary amid the current volatility, even if the tap size is relatively small. More concession may be warranted going into the auction.”

Italy plans to sell as much as 1 billion euros ($1.5 billion) of 2.1 percent inflation-linked bonds maturing in September 2021.

The yield on 10-year Italian index-linked bonds rose to 3.94 percent yesterday, after reaching 4.15 percent on July 18, the most since Bloomberg generic data started tracking the securities in 2007. The 10-year breakeven rate, derived from the difference in yield between conventional and inflation bonds, fell to 1.67 percentage points yesterday, the least since December on a closing-market basis.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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