Italy’s three-year borrowing costs spiked to 5.30 per cent at auction on Thursday as the the euro zone’s debt crisis intensifies after an aid deal for Spanish banks failed to reassure investors.
The day after rating agency Moody’s downgraded Spain’s debt by three-notches, Italy sold €4.5-billion in bonds, meeting the top of its planned issue range.
The yield on a three-year bond sold for €3-billion rose 1.4 percentage points from a previous auction a month ago, hitting a high since December. The sale was covered 1.6 times, slightly up from mid-May.
The bond fetched a lower yield at auction compared with market levels at the same time.
Analysts had expected the auction to be helped by its smaller-than-average size and the fact that this is likely to be the last tranche of the March, 2015, bond sold before Italy launches a new three-year benchmark.
Italy also placed two issues maturing in 2019 and 2020 which are no longer issued on a regular basis but have been requested by primary dealers.
Demand for the two ‘off-the-run’ bonds totalled 1.8 times the amount sold.