By Francesca Landini
MILAN Dec 13 Italy's cost of borrowing over
three years fell to the lowest since late 2010 at an auction on
Thursday, shielded from domestic political turmoil by the
European Central Bank's pledge to aid vulnerable euro zone
Rome sold nearly 3.5 billion euros ($4.56 billion) of the
new BTP bond maturing December 2015 and paid a yield of 2.50
percent. This was down from 2.64 percent on a similar sale a
month ago and the lowest since October 2010.
Prime Minister Mario Monti's announcement of a plan to
resign sparked a sell-off on Monday. But buyers in search of
appealing returns soon came back to Italian bonds given that an
ECB bond-buying scheme provides an effective backstop for
peripheral euro zone debt.
The auction allows Rome to complete its heavy funding
programme after a rollercoaster year of crisis. The treasury
will have to issue around 420 billion euros in 2013 to refinance
its 2 trillion euros debt.
"It shows there is ongoing support for short-term (debt on
the) Italian curve from investors, mainly domestic investors,"
said Alessandro Giansanti, strategist at ING in Amsterdam.
"There are mounting expectations that we can have lower
interest and deposit rates from the European Central Bank in the
next months. I think the market is not fully pricing in the
political risk coming from elections."
The treasury also sold 0.729 billion euros of a 15-year
bond, issuing a total amount of 4.22 billion euros, just short
of its top planned amount of 4.25 billion euros.