Italy’s One-Year Borrowing Costs Fall to Record Low at Auction

Italy’s one-year borrowing costs fell to a record low at a sale of 6.5 billion euros ($8.7 billion) of bills, the first auction after the European Central Bank unexpectedly cut its benchmark interest rate.

The Rome-based Treasury sold 365-day bills at 0.688 percent, down from 0.999 percent at the previous auction Oct. 10. Investors bid for 1.80 times the amount offered, up from 1.72 last month.

“The ECB rate move has added to the positive environment for short-dated peripheral paper, fueling the decline” in Italian and Spanish government bill yields, Elia Lattuga, a fixed-income strategist at UniCredit SpA, wrote in a note to investors before the sale.

Italy’s 10-year bond yield rose 2 basis points to 4.2 percent after the sale at 11:10 a.m. in Rome, leaving the difference with comparable German bunds at 236.4 basis points.

Italy redeems about 7.5 billion euros of bills Nov. 14. Today’s sale comes after the country last week issued 22.3 billion euros of government inflation-linked bonds aimed at retail investors. Following the record issue, the single biggest ever by a European government, the Treasury may trim its issuance plan for the rest of the year, Italian debt agency head Maria Cannata told SkyTG24 television in an interview yesterday.

The country returns to the market tomorrow, with the sale of as much as 5.5 billion euros of securities including three-year debt.

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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