Borrowing Costs Rise on Italian Benchmark 10-Year Bonds

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27 April 2012 @ 06:05 am EDT

Europe remained under pressure at the end of this week as Italy failed to run a successful bond auction, where the nation sold a total of 5.95 billion on rising borrowing costs and weakening demand, the thing that reflected the continuous instability in the debt market, which in result might pressure indebted nations more unless European policy makers intervene and curb the increase in yields.

The Italian Treasury sold 2.5 billion euros of bonds maturing in 10 years, meeting the maximum target of the sale, despite the increase in borrowing costs, where the sale produced an average yield of 5.84%, up from the previous of 5.24% recorded in March. Demand declined to 1.48 times the quantity offered from 1.65 times.

Moreover, Italy auctioned 2.416 billion euros of bonds maturing after 5 years in 2017, slightly below the maximum target of 2.5 billion, producing an average yield of 4.86%, compared with the previous of 4.18% recorded in March. The bid-to-cover ratio was 1.34 times the quantity offered.

Furthermore, the treasury also sold 1.03 billion euros of bonds maturing in 2019 and 2016, producing an average yield of 5.2% for those maturing after 7 years and of 4.29% for the debt maturing in 2016.

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