Italian Sovereign

Spanish and Italian yields recovered in Monday afternoon trading as the latest political rumblings from Italy looked set to be defused, leading to more benign conditions for the sovereigns’ upcoming auctions this week and next.

Italian 10 year yields remained steady but demand fell at auction on Friday, as investors digested the latest political news from the country.

Austria, Belgium, Finland and the UK were among the European sovereigns to add to their funding totals with benchmark deals this month.

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.