Italy's borrowing costs rise to three-month high

Italy's borrowing costs climbed to a three-month high as the country's elections stalemate spurred concern the debt crisis will worsen.

Italian 10-year bond yields jumped 36 basis to 4.85 per cent, after climbing as high as 4.93 percent. The additional yield investors demand to hold 10-year Italian bonds instead of benchmark German bunds, a measure of perceived risk, increased 43 basis points to 336 basis points.

The state sold 8.75 billion of six-month bills today at 1.237 per cent, the highest since October 29th and up from 0.731 per cent at an auction of similar maturity debt January 29th.

Credit-default swaps insuring Italian bonds rose as much as 43 basis points to 293, the highest since December 11th.

Bond yields also rose among other peripheral countries. Spain's 10-year yield jumped by 15 basis points to 5.32 per cent and Portugal's climbed 31 basis points to 6.48 per cent. Default swaps on Spain increased 28 to 287 and Portugal's climbed 25 to 408. The yield on Ireland’s October 2020 bond increased by about 7 basis points this morning, to 4.4 per cent, but as Germany's 10-year yield dropped seven basis points to 1.48 per cent, the spread, or differential with Germany’s cost of borrowing, was about 15 basis points.

Earlier this month Ireland’s October 2020 bond had dipped below 4 per cent, following the successful outcome of negotiations with the European Central Bank on promissory notes.

Bloomberg