Italy Tests Market in Bond Sale Amid Election Concern
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Italy will test markets today with the sale of long-term debt after borrowing costs rose to the highest in four months yesterday as inconclusive elections triggered renewed concern Europe’s debt crisis may deepen.
This week’s vote produced a hung parliament, with comedian Beppe Grillo’s anti-austerity movement winning more than 25 percent of the popular vote, creating the risk of another election later this year. The outcome raises the chance for prolonged uncertainty, putting Italy’s sovereign credit rating at risk for a downgrade, Moody’s Investors Service said today.
Italy will seek to sell as much as 4 billion euros ($5 billion) of a new 10-year bond today and 2.5 billion euros of a 5-year benchmark note.
“The auction comes in a very challenging environment,” Chiara Cremonesi, a fixed-income strategist at UniCredit SpA (UCG) in London, wrote in a note. Italy’s 10-year yield yesterday climbed 40 basis points, or 0.4 percentage point, to 4.89 percent, after rising as much as 44 basis points, the biggest increase since Dec. 19, 2011. The yield rose 4 basis points today to 4.94 percent at 8:34 a.m. Rome time.
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