Italy sells $10.3bn of bills as rates drop

PanARMENIAN.Net - Italian borrowing costs dropped at an auction of 8 billion euros ($10.3 billion) of six-month Treasury bills as investors view the country as a safer bet than Spain even amid rising political tension, Bloomberg reports.

The Treasury in Rome sold the 181-day bills at 1.347 percent, the lowest since March 28 and down from 1.503 percent at the last auction on Sept 26. Investors bid for 1.52 times the amount of bills offered today, up from 1.39 times last month. Italy returns to the market tomorrow with the sale of as much as 7 billion of five and 10-year bonds.

The auction comes as investors await the outcome of a regional vote in Sicily that could signal the direction of national elections that may come sooner than expected. Former premier Silvio Berlusconi, whose People of Liberty Party is the biggest in the national parliament, threatened on Oct 27 to withdraw support for Italian Prime Minister Mario Monti’s government, saying its policies are deepening the country’s recession.

“While tomorrow’s auction of long-dated paper is a more important test of sentiment, heightened political risk in Italy isn’t putting upward pressure on yields,” Nicholas Spiro of Spiro Sovereign Strategy in London said. “The Treasury got all its debt out the door today at an even lower yield than at a similar sale last month. Berlusconi’s posturing is no competition for the Draghi effect.”