Italian Sovereign

Italy will opt for a eurozone inflation linked trade if it comes back with another syndication this year, SSA Markets can reveal, although the well-funded issuer could rely on its auction programme until the new year.

Italy made a solid start to three days of auctions on Tuesday, as yields and demand for its two year zero coupon bonds remained steady despite the latest round of political turbulence from the country.

As European sovereigns gear up for a busy period of auctions in late August and September, here are the latest funding figures for selected issuers.

Germany’s 10 year borrowing costs rose to their highest level in 18 months at an auction on Wednesday, as better than expected economic data gave investors to switch out of the eurozone’s safest assets and into the periphery.

Italy’s 12 month borrowing costs dropped for the first time since May at an auction on Monday, as redemption flow of €8.2bn helped the sovereign comfortably place €7.5bn of debt.

Italy attracted healthy demand and lowered its funding costs at an auction of medium to long term debt on Tuesday, despite the sale being held against the backdrop of a supreme court appeal hearing that analysts warned could destabilise the country’s coalition government.

Italy breezed through a short dated debt auction on Monday ahead of the launch of a new 10 year line later in the week. The strong showing came in spite of concerns that the stability of the sovereign’s coalition government could be rocked by the result of a supreme court appeal hearing on Tuesday involving Silvio Berlusconi, the leader of one of the government coalition parties.

France, Germany and Spain held well received auctions of medium to long term debt this week. Here is a round-up of key European sovereigns' funding figures.

Italy suffered a slight setback at an auction on Thursday when it sold three year debt at a yield higher than where the bonds were trading in secondaries.

Italy emerged almost unscathed from a bill auction on Wednesday, held the morning after Standard & Poor’s downgraded its credit rating by one notch. A sale of longer dated debt on Thursday is also unlikely to be badly affected by the announcement, said analysts.

Italy navigated a potentially difficult auction on Thursday by placing its maximum target of €5bn of five year and 10 year bonds. Yields rose more than 40bp compared to the previous sales of the tenors a month ago and hit their highest level since March, but were still lower than expected, according to analysts.

Italy’s six month borrowing costs nearly doubled at a bill auction on Wednesday, as peripheral Eurozone yields remained elevated following the US Federal Reserve’s unveiling of a rough timetable for the unwinding of Quantitative Easing last week.