* Yields fall to 0.864 pct from 1.46 pct a month ago
* Treasury sells planned amount of 8.5 bln euros
MILAN Jan 10 Italy paid the lowest costs in
three years to raise funds through one-year bills on Thursday
with investors undeterred by a bitter election campaign in the
heavily indebted country.
The relatively high yields offered by Italian and Spanish
paper are still drawing investors, especially given the European
Central Bank's offer to buy bonds if euro zone countries sign up
for conditional help.
The Italian treasury sold all the planned 8.5 billion euros
($11 billion) of bills paying a yield of 0.864 percent, the
lowest since January 2010. It paid 1.46 percent on a similar
bill at a mid-December sale.
Debt markets for such countries have rallied in the first
week of 2013, with the risk premium for 10-year Italian BTPs
compared with equivalent German Bunds falling below 270 basis
points on Thursday, its lowest level in more than 16 months.
"Demand was good, the yield has fallen below the levels seen
last night and there was no concession at the auction. It's a
positive moment for markets and Italy is benefiting from that
together with other peripheral countries," said Giuseppe
Maraffino, a strategist at Barclays.
"Investors are hunting for higher returns, and with core
euro zone paper offering yields just above zero are lured by the
yields of peripheral debt."
Returns on German one-year paper stood at around 0.18
percent on Thursday.
Just minutes before the Italian sale, Madrid easily placed
5.8 billion euros of bonds, well above its target range and also
paying lower yields.
In a report issued late on Wednesday rating agency Standard
& Poor's said its base case scenario was that the elections in
Italy would allow pursuit of the current policy path, a view
that analysts say is reassuring investors.
"In our view, a victory of populist and anti-European forces
in Italy would have a detrimental effect on the corrections
taking place in the euro zone, especially if euro zone
membership itself were to be put in question," S&P said.
"We note, however, that the polls do not currently signal
such an outcome as likely."