Italy Borrowing Costs Drop to Record at Sale of One-Year Bills

Italian borrowing costs dropped to a record low at a sale of one-year bills in the country’s first debt auction since the European Central Bank pushed through a package of stimulus measures, boosting demand for higher-yielding euro-area assets.

The Rome-based Treasury sold 6.5 billion euros ($8.8 billion) of 364-day bills maturing in June 2015 at 0.495 percent, down from 0.65 percent at the previous auction of similar-maturity debt May 12. Investors bid 1.7 times the amount sold, compared with 1.64 last month. Italy redeems 7 billion euros of bills June 13.

The yield on Italian 10-year bonds dropped 2 basis points to 2.79 percent at 11:13 a.m. Rome time.

“A dovish ECB should continue to create the conditions for a bull market in the periphery in the near term,” Chiara Cremonesi, a fixed-income strategist at UniCredit Research in London, wrote in a note to clients June 9.

The ECB cut the main refinancing rate to a record-low 0.15 percent and moved the deposit rate below zero for the first time on June 5, meaning banks will be charged to park cash with the central bank. President Mario Draghi said the ECB will introduce targeted offerings of liquidity to banks to encourage them to lend, and that officials will start work on purchases of asset-backed securities.

Italy returns to the market tomorrow with the sale of as much as 8.5 billion euros of debt, including three, seven-and 30-year debt.

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