MILAN Dec 11 Italy's one-year borrowing costs
inched higher at an auction on Wednesday from the record low
they hit a month ago, as banks step up repayment of longer-term
European Central Bank loans and reduce excess liquidity on money
The Treasury sold 12-month bills at an average yield of 0.71
percent, marginally above a euro-era record low of 0.69 percent
paid in mid-November, soon after the ECB cut its benchmark
On Wednesday, Italy sold the planned 5.5 billion euros in
bills, meeting requests for 1.6 times that amount. The previous
auction was covered 1.8 times.
"The auction was solid, with borrowing costs fundamentally
unchanged for the Treasury," said UniCredit analyst Luca
Cazzulani. "The bid-to-cover fell slightly, but I would not
attach too much importance to that: at these yield levels some
investors may start switching into longer maturities."
An acceleration in repayments of longer-term ECB loans has
driven up short-term money-market rates lately, analysts say,
but a benchmark ECB rate of just 0.25 percent and its loose
monetary policy will cap any rise.
Supportive monetary policy in the euro zone has been feeding
demand for higher-yielding Italian and Spanish debt. Spain's
12-month debt costs have also edged up, rising to 0.88 percent
at an auction on Tuesday from a record-low 0.68 percent the
Italy has completed its 2013 funding plans ahead of
schedule, helped by a record sale of a retail bond last month.
In a sign of its comfortable funding position, it cancelled a
bond sale planned for Thursday and bought back 3.99 billion
euros in bonds on Tuesday.
Demand on Wednesday was helped by redemption flows. Nearly
7.5 billion euros in 12-month paper are maturing this week and a
further 17.7 billion euros in bills expire by year-end.
The Treasury will return to the markets at the end of
December. Those sales will settle in early January.