Italian Sovereign

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.

Italy’s two year borrowing costs more than doubled amid turbulent markets at auction on Tuesday ahead of an even more daunting task on Thursday when it tests international interest with longer dated debt.

Belgian bond yields spiked sharply and short term French and Germany yields jumped at auction on Monday, a trend that is likely to affect other eurozone sovereigns preparing for a busy week of issuance in volatile trading conditions.

This week's funding scorecard focuses on some of Europe's key sovereigns. Next week's scorecard will offer an update on Spanish regions and gencies.

Italy auctioned term debt on Thursday, the day after it sold bills at the highest levels since March. This week’s sell-off boosted demand, allowing Italy to hit its maximum target size for the auction of the longest bond on offer — a 4.75% September 2028.

Italian 12 month borrowing costs rose to their highest level since March on Wednesday, as the prospect of reduced central bank liquidity weighed on investors’ minds. An even tougher task looms on Thursday, when the sovereign sells €3.5bn-€5bn of three year and 15 year debt.

Italian yields rose at an auction of five and 10 year debt on Thursday but the sovereign is still in a comfortable funding position ahead of the summer, said analysts.