Italy pays record low yields for 15-yr, 3-yr bonds despite BES concerns

MILAN, July 11 Fri Jul 11, 2014 5:40am EDT

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MILAN, July 11 (Reuters) - Italy paid record low yields to sell 15-year and 3-year bonds at auction on Friday as persistently abundant liquidity appeared to overshadow financial concerns about the parent company of Banco Espirito Santo , Portugal's biggest bank.

The Italian treasury managed to sell a total of 7.5 billion euros ($10.23 billion) - the top of its planned target range - as it auctioned three-year, seven-year and 15-year bonds, despite a volatile week in which bonds came under pressure from weak Italian economic data.

"The dynamics of economic data will remain the most important factor for Italy and Spain while Portuguese domestic issues in the banking sector will be more relevant for Portugal's government bonds," said Luca Cazzulani, an analyst at UniCredit.

A March 2030 bond fetched an average 3.44 percent yield, down from 3.575 percent when it was placed through a syndicate of banks in May, and the lowest since the launch of the euro.

Demand was 1.42 times the 2 billion euros assigned.

The Treasury also placed 3 billion euros of a three-year bond, paying an average yield of 0.84 percent, down from 0.89 percent at the mid-June sale and also the lowest yield paid for this bond since the introduction of the euro.

Demand for this issue was slightly lower than at the previous auction, with the bid-to-cover ratio falling to 1.49 from 1.6.

A seven-year bond also on auction was sold at an average yield of 2.17 percent, down from 2.12 percent at the previous auction a month ago. ($1 = 0.7331 Euros) (Reporting by Lisa Jucca)

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