Italy Sells Maximum EU11 Billion of Bills as Rates Decline

Italy sold 11 billion euros ($14.5 billion) of Treasury bills today, meeting its target, and borrowing costs plunged from the previous sale.

The Rome-based Treasury sold 8 billion euros of 182-day bills at 1.969 percent, the lowest since May and down from 3.251 percent at the last auction of similar-maturity securities on Dec. 28. Investors bid for 1.35 times the amount offered, down from 1.69 times last month. The Treasury also sold 3 billion euros of 331-day bills at a rate of 2.214 percent.

“Bond auctions in Italy are no longer nerve-wracking affairs,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said by e-mail. “The risks of a sharp sell-off in Italy’s debt market have fallen significantly of late.”

Italy has benefited from the European Central Bank’s efforts to fight the spread of the debt crisis by shoring up banks and propping up demand for government bonds. The Frankfurt-based ECB loaned euro-region banks a record 489 billion euros for three years on Dec. 21 to avert a credit crunch and has bought 217 billion euros of government bonds since beginning the purchases in May.

Italy’s 10-year yield was 5.96 percent at 11:11 a.m. Rome time, falling 9 basis points from yesterday.

Today’s sale comes after the Treasury auctioned 5 billion euros of inflation-linked and zero-coupon bonds yesterday, the maximum for the sale. The Treasury is rushing to raise funds to pay for 25.8 billion euros of maturing bonds on Feb. 1 and needs to sell about 450 billion euros of bonds and bills this year to cover redemptions and finance the deficit.