Italy Sells Index-Linked Debt Due 2023 at 7.3%; 10-Year Auction Tomorrow

Italy sold inflation-linked bonds to yield 7.3 percent, the second time in a week that the Treasury auctioned debt above the 7 percent threshold that led Greece, Portugal and Ireland to seek bailouts.

The Rome-based Treasury sold 567 million ($759 million) of the bonds due September 2023, less than the 750 million-euro maximum for the sale. The Treasury hasn’t sold the bonds since March of 2010, when it paid 2.19 percent. Demand was 2.16 times the amount sold.

Italy’s borrowing costs have surged to the highest in more than 14 years at recent auctions as investors shunned the country’s bonds on concern about the sustainability of Europe’s second-biggest debt. Today’s sale came as Prime Minister Mario Monti prepares additional budget measures to cut a debt of 1.9 trillion euros and boost the economy in a country where growth has trailed the euro-region average for more than a decade.

The Treasury faces a bigger test of market sentiment tomorrow, when it aims to sell as much as 8 billion euros of bonds at three maturities, including a 10-year offer.

To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net.

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