Italy Sells 5.25 Billion Euros of Bonds as Demand Rises

Italy sold 5.25 billion euros of debt, including a bond with a maturity longer than 10 years for the first time in seven months, as concern eased about Italy’s ability to finance the region’s second-biggest debt.

The Treasury sold 3.5 billion euros ($4.5 billion) of its 3-year benchmark bond to yield 3.91 percent, little changed from the 3.89 percent on April 12 and matching the maximum amount set for the auction.

Italy also sold 651 million euros of a 5 percent 2022 bond at 5.66 percent and auctioned 557 million euros of bonds due in 2025, the longest-maturity debt sold since October, at 5.9 percent. The Treasury also auctioned 542 million euros of a 2020 bond at 5.33 percent, bringing the total for the sale to 5.25 billion euros, matching the maximum target.

Prime Minister Mario Monti is implementing 20 billion euros in spending cuts and tax increases to erase the budget gap and trim a 1.9 trillion-euro debt. The austerity coupled with the European Central Bank’s unlimited three-year loans helped bring down 10-year borrowing costs by more than 2 percentage points between his appointment in November and early March. Bonds have now given back some of those gains as mounting concern about Spain’s ability to tame its deficit increased contagion.

Spain sold 2.9 billion euros of one-year and 18-month bills, just below the maximum target for the sale, and its borrowing costs rose at an auction today.

At the Italian sale, investors bid for 1.52 times the amount of three-year bonds on offer, up from 1.43 times last month. The bid to cover on the 10-year bond was 2.27 times, while investors asked for 1.93 times the 2025 bond.

The yield on Italy’s 10-year bond was up 18 basis points to 5.69 percent after the auction at 11:30 a.m. in Rome, pushing the difference with similar-maturity German debt to 424 basis points, the highest since Jan. 31.

To contact the reporter on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net

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