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July 14, 2011 at 09:56 AM
In its latest bond auction on Thursday, Italy found itself paying the highest interest rates in three years to unload long-term debt. Investors demanded yields of 4.93% for five-year bonds and 5.9% for 15-year bonds.
The country managed to sell 4.97 billion euros ($7 billion) in bonds. Its target was 5 billion euros, indicating that investors are still willing to take a chance on Italy’s bonds even if they do demand higher returns for doing so.
Reuters reported that analysts said the yield levels were unsustainable in the long term. Kathleen Brooks, research director UK EMEA at Forex.com, was quoted saying, “While the auction will most likely be spun as a success, there are some worrying signs and Italy won’t be able to continue to have debt auctions like this indefinitely.” Italy’s debt load amounts to 120% of GDP and within the euro zone, only Greece carries a bigger burden.
