Italy’s Yields Drop to Record Low at Five-, 10-Year Debt Sale

Italy sold five-year and 10-year debt at record lows amid bets the European Central Bank will introduce more stimulus measures at a meeting next week.

The Rome-based Treasury sold 2.75 billion euros ($3.74 billion) of 2019 notes at a record low 1.62 percent, down from 1.84 percent at the previous sale April 29. Italy also placed 3 billion euros of 10-year bonds at a record low 3.01 percent, down from 3.22 percent last month, and 1.75 billion euros of floaters due November 2019 at 1.38 percent. The total matched the 7.5 billion euros that was the maximum target for the auction.

“Expectations for further ECB action at next week’s meeting remain supportive factors for further tighening of spreads,” Annalisa Piazza, a fixed-income strategist at Newedge Group in London, said in an e-mailed note to clients before the sale.

Italy’s 10-year yield rose 2 basis points to 2.95 percent at 11:43 a.m. Rome time, pushing the difference with comparable German Bunds to 161.4 basis points.

ECB President Mario Draghi said at a conference in Sintra, Portugal, this week that policy makers need to be “particularly watchful” of low inflation. Consumer-price increases in the euro region have been less than half the ECB’s goal of just under 2 percent since October. Officials are due to meet on June 5 to set monetary policy.

Investors Bid

Investors bid 1.38 times the amount of the five-year debt sold and 1.32 for the 10-year bonds sold today, compared with 1.30 for both bonds last month.

The sale is the first of longer-term debt since Italian Premier Matteo Renzi secured more than 40 percent of the national vote in the EU elections May 25, scoring an historic victory and defeating Beppe Grillo’s euro-skeptic party by a large margin. In a press conference in Rome this week, Renzi pledged to press on with policy changes at the EU level as well as national measures, including an overhaul of Italy’s labor market and electoral law.

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