Italy's six-month debt costs fall at auction

Italy’s six-month borrowing costs fell to 0.59 per cent at an auction today, not far from a euro lifetime low of 0.50 per cent marked in April, as short-term debt continued to benefit from ultra-easy monetary policy in the euro zone.

The Treasury sold the full planned amount of €8 billion at the sale, drawing bids for 1.5 times that amount.

The previous auction in late December had seen poor demand in illiquid holiday markets and Italy had to pay 0.83 per cent to sell six-month debt.

The Treasury returns to the market tomorrow, offering up to €8.5 billion in longer-term debt including a new five-year bond.

“I expect Thursday’s auction to confirm the healthy appetite for Italian paper seen so far this year,” ING strategist Alessandro Giansanti said.

Demand today was probably fed by large redemption flows this week from maturing debt and coupon payments, analysts said.

“The European Central Bank’s stance remains supportive for short-dated peripheral paper, with risks tilted towards further easing,” UniCredit analysts said in a note.

Yesterday the Treasury sold zero-coupon certificates and an inflation-linked bond for a total of €3.75 billion, at a well-received auction that saw two-year yields fall to their lowest since the launch of the euro. (Reuters)