Markets

Italy pays record low yields at bond sale after ECB rate cut

Published September 11, 2014 Updated September 11, 2014 12:49pm

MILAN: Italy paid record-low yields to sell three-, seven- and 15-year bonds on Thursday at the first auction held after a surprise interest rate cut by the European Central Bank last week.

The Treasury raised 6.96 billion euros ($9 billion) over three bonds, at the top of its planned issue range, as analysts said the ECB's expansionary stance supports demand for higher-yielding debt from weaker euro zone issuers.

Italy sold a three-year bond due in May 2017 at an average 0.52 percent, down from 0.84 percent when the bond was last sold in July. Italy cancelled its mid-month bond sale in August citing ample cash availability.

Thursday's three-year bond sale was covered 1.66 times, versus 1.49 times at the slightly bigger July auction.

A December 2021 seven-year bond fetched an average 1.71 percent yield, down from 2.17 percent at the mid-July sale. Demand strengthened from two months ago pushing the bid-to-cover to 1.46 times from 1.35 times.

Italy paid 3.03 percent to sell a March 2030 15-year bond, down from 3.44 percent in mid-July. Demand totalled 1.64 times the amount sold up from 1.42 times then.

The ECB last week unexpectedly cut benchmark rates to near zero and pledged to buy asset-backed securities and covered bonds in a bid to fight too-low inflation in the euro zone.

Citi analysts said in a note that peripheral euro zone bonds would continue to benefit from the ECB's stance in the medium term, despite volatility this week stemming from uncertainty ahead of a Scottish vote on independence and supply pressures.