Italian Sovereign

Italy’s yields dropped for the second day in a row on Thursday, as a renewed threat to the country’s fragile coalition government failed to derail a six month bill sale ahead of a long dated debt auction on Friday.

Italy’s two year borrowing costs dropped to their lowest level since May at an auction on Wednesday, making a strong start on a busy few days of issuance for the sovereign.

Italy, which had held ambitions to print a long-dated benchmark bond this year, is now turning its attentions towards a seven year deal. Maria Cannata, director general of the public debt directorate in the Italian Treasury, said on Tuesday that the country was also planning to embark on a series of buy-backs and exchanges.

Italy’s borrowing costs rose at both ends of the curve at auction on Thursday, although it pulled in healthy demand to a new three year line and hit its maximum volume target.

Italy’s one year borrowing costs rose to their highest level this year at an auction on Wednesday, ahead of a longer dated debt sale a day later.

Italy found demand at the ultra long part of the curve and Spain scored its lowest 10 year borrowing cost in three years mid-week, as fears over potential military action in Syria and a reduction in US central bank liquidity support failed to derail the eurozone periphery’s journey back to capital market normalcy.

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.