December 30, 2010

Modest Demand Greets Italy Government Bond Sale

Spreads higher, prices lower as Italy sells 8 billion euro worth of notes, bills

 

In thin end-of-year trading, Italy managed to sell 8.1 billion euros’ ($10.77 billion) worth of 3- and 10-year bonds on Thursday, following a sale on Wednesday of 3.5 billion euros in zero-coupon bonds maturing in 2012 and 8.5 billion euros in six-month bills. Thursday also saw a rise in Italian bond futures.

The bills’ auction saw yields 20 basis points higher than at the last such sale, and there were only slightly more bidders at the zero-coupon bond sale than bonds for sale, according to Reuters.

The Thursday sale consisted of 6 billion euros in 3- and 10-year BTPs (Buoni del Tesoro Poliennali), maturing in 2013 and 2021, and 2.1 billion euros of floating-rate notes. The target had been to sell 8.5 billion euros’ worth of the bonds, but sales fell short.  Liquidity concerns and the persistent debt woes in the euro zone drove yield higher, and the three-year bonds were discounted, according to Barclays Capital strategists, close to the cheapest levels such bonds have reached.

Barclays also said that the Italian bonds sold Wednesday underperformed both German Bunds and Spanish government bonds since the middle of December. In a statement, the company said, “Past auction concessions have tended to reverse post the supply and thus we see room for some tightening in the next few days against both other peripherals and versus the...core, especially as liquidity conditions normalize.”

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