(Corrects paragraph three to refer to three-year yields)
MILAN Jan 11 Return-hungry investors snapped up
Italian bonds at an auction on Friday, pushing yields on
three-year paper below 2 percent for the first time since March
2010 with and little concern shown for the upcoming general
The treasury sold 3.5 billion euros of three-year bonds
paying a yield of 1.85 percent, down from 2.5 percent at a
similar sale a month ago.
While three-year yields fell by 65 basis points at Friday's
sale, they continue to look attractive compared with near-zero
return on equivalent German Bunds.
Italy, along with Spain, is one of the main beneficiaries of
the European Central Bank's pledge to buy bonds if a euro zone
country gets into trouble and needs a bailout.
This promise is acting as a backstop for investors,
particularly with shorter-dated debt which the ECB will target.
Rome also issued 1.5 billion euros of two floating rate
CCTeu notes maturing in June 2017 and October 2017, bringing the
total debt sold on Friday to the top-targeted amount of 5
"The auction went really well," said Chiara Manenti,
fixed-income strategist at Intesa Sanpaolo.
"With these borrowing costs Italy is set to save quite a lot
of money for servicing its debt compared with official estimates
of 89 billion euros for this year."
The sale marks a positive start of the year for the
treasury, which has a gross borrowing target of around 420
billion euros in 2013, 10 percent less than last year.
More evenly-spread debt redemptions are set to give Rome
greater flexibility in planning its funding. But market
volatility could increase closer to a general election scheduled
on Feb 24-25.
Polls point to a victory of the centre-left PD party, which
is expected to continue on the path of reforms started by the
technocrat government of outgoing Prime Minister Mario Monti.
(Reporting by Francesca Landini, editing by Silvia