Italy Sells 4.25 Billion of Bonds as Borrowing Costs Rise

Italy sold 4.25 billion euros of bonds, the maximum amount for the auction, and its borrowing costs rose as European leaders remained divided over how to stop contagion from the debt crisis.

The Treasury sold 3.5 billion euros ($4.4 billion) of the zero-coupon 2014 debt to yield 4.037 percent, up from 3.355 percent at the previous auction on April 24. Investors bid for 1.66 times the amount offered, down from 1.80 times last month. The Rome-based Treasury also sold 750 million euros of inflation-linked bonds due in 2016 and 2017 to yield 4.39 percent and 4.6 percent, respectively.

Italy’s 10-year bond remained lower after the auction, with the yield rising 3 basis points to 5.7 percent at 11:30 a.m. Rome time, pushing the difference or spread with similar-maturing German debt to 433 basis points.

European leaders at a summit last week remained divided on solutions to the debt crisis, with German Chancellor Angela Merkel resisting calls for jointly issuing bonds to lower borrowing costs for the so-called peripheral countries. Italian Prime Minister Mario Monti said most European Union leaders backed the idea the euro bonds. Italy can help coax Germany to act for Europe’s “common good,” Monti told Italian television station La7 in an interview on May 24.

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