Italy Sells 5-Year, 10-Year Debt at Record Low Yields

Italy sold five-year and 10-year debt at record lows today as investors remain positive on the country’s bonds amid the ongoing recovery in the euro area and last week’s positive rating action.

The Rome-based Treasury sold 3.5 billion euros ($4.8 billion) of 2019 notes at a record low 1.84 percent, down from 1.88 percent at the previous sale March 28. Italy also placed 3 billion euros of 10-year bonds at a record low 3.22 percent, down from 3.29 percent last month, and 2.28 billion euros of floaters due November 2019 at 1.32 percent. The total was near the 9 billion euros that was the maximum target for the auction.

“Demand for the Italian paper was decent, with market dealers still showing interest in the country’s debt, due to the encoraging prospects also depicted by the recent credit review,” Annalisa Piazza, a fixed-income strategist at Newedge Group in London, said in an e-mailed note to clients.

The auction comes after Fitch Ratings last week kept Italy’s credit rating unchanged at BBB+, while raising the outlook to stable from negative, citing the end of the economic recession and improved financing conditions.

Inflation Threat

Investors bid 1.30 times the amount of the five-year debt and the same for the 10-year bonds sold today, compared with 1.41 and 1.25 times last month respectively.

Dealers are waiting to see whether the European Central Bank will take further action to combat low inflation. Draghi told German lawmakers yesterday that the ECB stands ready to embark on quantitative easing, though such a program isn’t imminent and is relatively unlikely for now, according to a euro-area official present at the meeting. While the ECB expects a prolonged period of low inflation, Draghi doesn’t see the imminent threat of falling prices, he told lawmakers.

Inflation in the 18-nation currency bloc slowed to 0.5 percent last month, the weakest pace in more than four years and well below the ECB’s goal of just under 2 percent. This month’s data are due tomorrow.

Italy’s 10-year yield rose 3 basis points to 3.16 percent at 12:49 p.m. Rome time.

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