Related News
Investors more willing to buy Italian bills as US$14b raised
Source: Agencies |
December 29, 2011, Thursday
|
Print Edition
Print Edition
ITALY saw investors more willing to part with their cash yesterday as it raised 10.7 billion euros (US$14 billion) in a pair of auctions, a sign that market jitters may be easing as the country presses ahead with its austerity measures.
The lower rates Italy had to pay are the first post-Christmas test of sentiment in the markets over the debt crisis that has engulfed the 17 countries that use the euro, and may be a signal that some of last week's massive injection of money into the European banking system from the European Central Bank may be filtering through into demand for government bonds.
The scale of the falls in Italy's funding costs were dramatic and helped the country's benchmark 10-year bond yield in the markets remain below the 7 percent level, widely considered to be unsustainable in the long run.
The Bank of Italy said the average yield on its 9 billion euros six-month bill offering was 3.251 percent, half the 6.504 percent rate it had to pay at the equivalent auction last month. And an auction of two-year bonds, which raised 1.73 billion euros, also saw the yield fall to 4.853 percent from 7.814 percent last month.
"This is an encouraging development, suggesting that the Italian sovereign debt market has pulled back from the dangerous situation in late November," said Raj Badiani, a senior economist at IHS Global Insight.
"The calmer environment reflects the passing of additional austerity measures and some welcome progress on the structural reform agenda, coupled with the ECB's decision to provide additional cheap financing to Italian banks," Badiani added.
Italy is the eurozone's third-largest economy and is considered too big to save under the eurozone's current bailout funds. Markets have grown fearful over the past few months that Italy will find it difficult to pay off its massive debts, which stand at around 1.9 trillion euros. A further test of investors' appetite for Italian debt will come today when the country offers more bonds that could potentially raise a similar amount to yesterday's offerings.
New premier Mario Monti got parliamentary approval last week for more spending cuts and tax increases to save the country from financial ruin. One of the most controversial aspects of the package is reform of Italy's bloated pension system.
Monti was to chair a Cabinet meeting yesterday on a second wave of measures aimed to boost Italy's anemic economy, which may enter a slump in the first quarter of 2012.
As well as a possible consequence of increased confidence that Monti's efforts will keep the country's finances on a sustainable path, yesterday's auctions could also have been supported as well by a large infusion of credit to eurozone banks last week from the ECB.
There has been speculation the stronger banks might use the cheap, long-term loans - at 1 percent interest rate - to buy government bonds that carry higher interest rates and profit from the difference.
The lower rates Italy had to pay are the first post-Christmas test of sentiment in the markets over the debt crisis that has engulfed the 17 countries that use the euro, and may be a signal that some of last week's massive injection of money into the European banking system from the European Central Bank may be filtering through into demand for government bonds.
The scale of the falls in Italy's funding costs were dramatic and helped the country's benchmark 10-year bond yield in the markets remain below the 7 percent level, widely considered to be unsustainable in the long run.
The Bank of Italy said the average yield on its 9 billion euros six-month bill offering was 3.251 percent, half the 6.504 percent rate it had to pay at the equivalent auction last month. And an auction of two-year bonds, which raised 1.73 billion euros, also saw the yield fall to 4.853 percent from 7.814 percent last month.
"This is an encouraging development, suggesting that the Italian sovereign debt market has pulled back from the dangerous situation in late November," said Raj Badiani, a senior economist at IHS Global Insight.
"The calmer environment reflects the passing of additional austerity measures and some welcome progress on the structural reform agenda, coupled with the ECB's decision to provide additional cheap financing to Italian banks," Badiani added.
Italy is the eurozone's third-largest economy and is considered too big to save under the eurozone's current bailout funds. Markets have grown fearful over the past few months that Italy will find it difficult to pay off its massive debts, which stand at around 1.9 trillion euros. A further test of investors' appetite for Italian debt will come today when the country offers more bonds that could potentially raise a similar amount to yesterday's offerings.
New premier Mario Monti got parliamentary approval last week for more spending cuts and tax increases to save the country from financial ruin. One of the most controversial aspects of the package is reform of Italy's bloated pension system.
Monti was to chair a Cabinet meeting yesterday on a second wave of measures aimed to boost Italy's anemic economy, which may enter a slump in the first quarter of 2012.
As well as a possible consequence of increased confidence that Monti's efforts will keep the country's finances on a sustainable path, yesterday's auctions could also have been supported as well by a large infusion of credit to eurozone banks last week from the ECB.
There has been speculation the stronger banks might use the cheap, long-term loans - at 1 percent interest rate - to buy government bonds that carry higher interest rates and profit from the difference.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
