Under pressure Italy sees costs spike to 5.3pc at bond auction

City A.M. Reporter
ITALY’s three-year borrowing costs spiked to 5.3 per cent at an auction yesterday, underlining the mounting pressures on the Eurozone’s third-largest economy after a Spanish aid deal failed to convince investors the bloc’s crisis can be contained.

With its economic reforms stalling and market speculation rising that it too may eventually need a bailout, Italy paid the most since December for three-year debt which it had sold at 3.9 per cent only a month ago.

But in highly volatile markets just one day after a three-notch downgrade of Spain's sovereign rating, Rome raised its top planned amount of €4.5bn from three bonds and sold the debt at yields below market levels.

“These auctions will be judged a success in the short term, but the trend in yields and spreads is something which requires something from the policymaker level to reverse,” said Peter Chatwell, a rate strategist at Credit Agricole in London.