Italian debt yields rise as ECB cash injection wears off

Tim Wallace
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WEAK economic data cooled investors’ demand for Italian and Spanish debt yesterday, reversing some of the gains seen after last week’s huge cash injection from the European Central Bank.

The European Financial Stability Facility (EFSF), Holland, Austria and the UK all successfully sold debt, showing investor sentiment remains stronger than at the end of 2011.

Yields rose above five per cent on Spanish and Italian 10-year bonds after plummeting below the psychologically important level last week.

Spanish yields rose 0.173 percentage points yesterday to 5.145 per cent, and Italian yields rose 0.139 percentage points to 5.069 per cent.

Britain successfully sold £1bn in 30-year index linked bonds at a real yield of 0.044 per cent, maintaining its safe-haven status as a secure government from which to buy debt.

The EFSF sold €3.443bn (£2.87bn) of three-month bonds at a yield of 0.0516 per cent, with Japan buying €160m of the debt issue.

The country intends to keep buying the debt as long as European governments try to resolve the debt crisis.