Italian five-year bond yields surge to 14-year high

Italy sold €3bn of five-year bonds, the maximum target, at the highest yield in more than 14 years as Mario Monti seeks to form a new government.

The Rome-based Treasury sold the bonds to yield 6.29%, the highest since June 1997 and up from 5.32% at the last auction on 13 October. Demand was 1.47 times the amount on offer, compared with 1.34 times last month, according to Bloomberg.

Yields on Italy’s benchmark 10-year bond were 6.4% at 11.15am in Rome after the auction, down from a euro-era record of 7.48% on 9 November.

Italy was also forced to pay 6.087% on one-year bills at an auction on 10 November, the highest in over 14 years, amidst the worsening European debt crisis.

Monti, an economist and former adviser to Goldman Sachs, will try to reassure investors Italy can cut a €1.9trn debt and spur economic growth.

The country faces about €200bn euros in bond maturities next year, more than twice as much as Spain. Its first bond redemption comes on 1 February when Italy must pay back €26bn euros for debt sold 10 years ago.

 

This article was first published on Investment Week

 

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