Italian debt costs keep rising ahead of crucial EU summit

City A.M. Reporter
ITALY’S six-month borrowing costs neared three per cent at auction yesterday, their highest since December, piling pressure on the government as it pushes for steps to ease market tensions at an EU summit starting today.

Italy sold €9bn of six-month bills at an average 2.96 per cent yield, up from 2.10 per cent it paid only a month ago. The Treasury faces a tougher market test today when it offers up to €5.5bn in five- and 10-year debt.

On Tuesday, Spain paid 3.24 per cent to sell six-month bills. Madrid is seen at risk of having to ask for more aid after formally requesting a European rescue for its banks this week. But doubts are also growing on Italy’s ability to keep funding its €1.95 trillion debt, which makes it the world’s fourth-largest sovereign debtor.

Yesterday’s sale was covered 1.6 times, in line with a month ago, with demand helped by €9.9bn of maturing bills. Domestic appetite has so far allowed the Treasury to complete 56 per cent of its €445bn annual funding plan.

With its benchmark 10-year yields above six per cent, Italy is calling for the Eurozone’s rescue funds to be used to ease pressure on its bonds.