Italy’s short-term funding costs hit euro lifetime low

Italy’s one-year funding costs fell further at auction today, marking a new euro lifetime low thanks to continued appetite for short-term debt from weaker euro zone issuers.

Italy sold the planned €7 billion in bills maturing in March 2015 at an average 0.59 per cent yield. It had last sold one-year paper a month ago at 0.68 per cent.

As a comparison, triple-A rated Germany issued one-year debt at 0.09 per cent at the end of February.

Demand for Italian bills fell from a month ago. Today’s sale was covered 1.5 times, compared with 1.6 times at the slightly bigger February sale. Italy will reimburse on Friday one-year bills worth €7.75 billion.

The Treasury returns to the market today selling up to €7.75 billion over four bonds with a maturity of three, seven, 15 and 30 years.

Capitalising on stronger investor appetite for Italian debt, the Treasury is also offering a new 10-year inflation-linked bond through a syndicate of banks.

"The European Central Bank left interest rates unchanged last week and unveiled no other measure to fight the bloc's low inflation, indicating that the bar for further action may be higher than what the market anticipated," UniCredit analysts said in a note.

However, “interest for periphery Treasury-bills remains high”. (Reuters)