Italy Sells EU4.5 Billion of Bonds as Yields Surge on Contagion

Italy sold 4.5 billion euros ($5.6 billion) of debt, matching its maximum target for the auction, as Spain’s request of external assistance for its banks heightened pressure on Italy.

The Treasury sold 3 billion euros of its 3-year benchmark bond to yield 5.3 percent, from the 3.91 percent at the last auction on May 14 and the highest paid since December. Italy also sold 627 million of a 4.25 percent 2019 bond at 6.1 percent and 873 million euros of bonds due in 2020 at 6.13 percent.

After Spain requested 100 billion euros to recapitalize its banks, becoming the fourth euro member to need a rescue since the start of the region’s debt crisis, concerns have grown that Italy may follow. The relief rally after the aid request was short-lived, with Spain’s 10-yield reaching a euro-era record 6.974 percent today.

At the Italian sale, investors bid for 1.59 times the amount of three-year bonds on offer, up from 1.52 times last month.

The yield on Italy’s 10-year bond rose 7 basis points to 6.285 percent after the auction at 11:25 a.m. in Rome, pushing the difference with similar-maturity German debt to 478 basis points.

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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