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Italy Sells 8 Billion Euros of Treasury Bills as Demand Rises

ECB President Mario Draghi
ECB President Mario Draghi opened the door earlier this month to buying Spanish and Italian securities, along with the euro area’s bailout funds. Photographer: Hannelore Foerster/Bloomberg

Italy sold 8 billion euros ($9.9 billion) of Treasury bills as investor demand rose from a previous sale last month.

The Rome-based Treasury sold the 364-day bills at 2.767 percent, up from 2.697 percent at the last sale of similar-maturity debt on July 12. Investors bid 1.69 times the amount of bills offered, up from 1.55 times last month.

European Central Bank President Mario Draghi opened the door earlier this month to buying Spanish and Italian securities, along with the euro area’s bailout funds. While the announcement offered Europe an initial respite from the turmoil, Spanish and Italian yields rose last week on concern that the ECB’s plan won’t be sufficient to tame the region’s debt crisis.

“Demand held up well and borrowing costs more or less held steady, which, all things considered, is probably not a bad result,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mailed comment.

The yield on Italy’s 10-year bond was little changed at 5.90 percent at 4:17 p.m. in Rome, leaving the difference with German bunds at 449.4 basis points.

Precarious Position

Still, Spiro said Italy remains in a precarious position. “Not only are there significant concerns regarding the credibility and effectiveness of a revived bond-buying program for Spain and Italy, Rome is increasingly wary of requesting external assistance because of the stigma attached to any aid program.”

Italian Finance Minister Vittorio Grilli said the country doesn’t need to tap Europe’s bailout funds, la Repubblica reported yesterday, citing an interview. “The European Central Bank’s toolbox, once operative, will substantially reduce tension on bond spreads,” Grilli was quoted as saying.

ECB bond purchases won’t solve Spain and Italy’s difficulties maintaining investor confidence, Luc Coene, the institute’s Governing Council member and Belgian central bank governor, said in an Aug. 11 interview with De Tijd and L’Echo.

Grilli also told Repubblica that the government led by Prime Minister Mario Monti is studying all options to reduce the nation’s debt while ruling out a wealth tax and selling stakes in state-owned companies Finmeccanica SpA, Enel SpA and Eni SpA at current market prices.

Italian government debt reached a record 1.97 trillion euros at the end of June, the Bank of Italy said today in a public-finances report. Italy’s debt rose by 6.6 billion euros in June from the previous month.

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