May 10 (Bloomberg) -- Italy’s one-year borrowing costs fell to a record low at a sale of 10 billion euros ($13 billion) of bills after the new government reiterated a commitment to keep the deficit within the European Union limit.
The Rome-based Treasury sold 7 billion euros of 365-day bills at 0.703 percent, down from 0.922 percent at the previous auction April 10. Investors bid for 1.16 times the amount offered, down from 1.64 times last month. It also sold 3 billion euros of 219-day bills at 0.393 percent.
The auction comes one day after Prime Minister Enrico Letta’s new government confirmed its intention to postpone the payment of a property tax due in June as consumer spending slumps and joblessness remains near a 20-year high. Finance Minister Fabrizio Saccomanni said yesterday that the government wouldn’t need additional budget cuts to cover the lost revenue and remained committed to holding the deficit to less than 3 percent of gross domestic product.
Europe’s fourth-biggest economy is probably in its eighth quarter of contraction as austerity measures adopted by the previous government to control the budget gap deepened the slump.
Italy’s 10-year bond yield rose 1 basis point to 3.9 percent after the sale at 11:12 a.m. in Rome. Italy returns to the market May 13 with the sale of longer-maturity bonds.
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