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Italy's borrowing costs spiral
Source: Agencies |
November 30, 2011, Wednesday
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Print Edition
Print Edition
ITALY'S borrowing costs hit a euro lifetime peak of nearly 8 percent yesterday as pressure on eurozone finance ministers intensified to staunch a two-year-old debt crisis that is blighting the world economy.
Rome had to offer a record 7.89 percent yield to sell 3-year bonds, a huge leap from the 4.93 percent it paid in late October, and 7.56 percent for 10-year bonds, compared with 6.06 percent at that time.
The borrowing costs were above the levels at which Greece, Ireland and Portugal applied for international bailouts, but European stocks and bonds rallied in apparent relief at the strong demand, with the maximum 7.5 billion euros (US$9.99 billion) sold.
"In an ideal world, these yields, and the fact that the 3-year was above 8 percent in the gray market this morning, would serve to give the Ecofin/Eurogroup a sense of added urgency, but this is a far from ideal world," said Peter Chatwell, rate strategist at Credit Agricole in London.
The euro and European markets had earlier dipped on a report in business daily La Tribune that ratings agency Standard & Poor's would downgrade France's AAA credit rating within 10 days, dealing a body blow to the eurozone's ability to rescue heavily indebted countries.
New Italian Prime Minister Mario Monti is due to outline his fiscal and economic reform plans to finance ministers of the 17-nation currency area amid reports, denied in Washington and Rome, of a possible approach to the International Monetary Fund.
Italy, with a 1.9 trillion euro debt pile - equivalent to 120 percent of economic output - needs to refinance some 340 billion euros of maturing debt next year with big redemptions starting in late January. It has promised to balance its budget in 2013 but yesterday's auction suggested it will struggle to keep borrowing costs under control without international help.
Italian daily La Repubblica said EU Economic and Monetary Affairs Commissioner Olli Rehn would tell eurozone ministers that Italy needs to unveil fiscal measures worth 11 billion euros immediately to meet its target.
Rome had to offer a record 7.89 percent yield to sell 3-year bonds, a huge leap from the 4.93 percent it paid in late October, and 7.56 percent for 10-year bonds, compared with 6.06 percent at that time.
The borrowing costs were above the levels at which Greece, Ireland and Portugal applied for international bailouts, but European stocks and bonds rallied in apparent relief at the strong demand, with the maximum 7.5 billion euros (US$9.99 billion) sold.
"In an ideal world, these yields, and the fact that the 3-year was above 8 percent in the gray market this morning, would serve to give the Ecofin/Eurogroup a sense of added urgency, but this is a far from ideal world," said Peter Chatwell, rate strategist at Credit Agricole in London.
The euro and European markets had earlier dipped on a report in business daily La Tribune that ratings agency Standard & Poor's would downgrade France's AAA credit rating within 10 days, dealing a body blow to the eurozone's ability to rescue heavily indebted countries.
New Italian Prime Minister Mario Monti is due to outline his fiscal and economic reform plans to finance ministers of the 17-nation currency area amid reports, denied in Washington and Rome, of a possible approach to the International Monetary Fund.
Italy, with a 1.9 trillion euro debt pile - equivalent to 120 percent of economic output - needs to refinance some 340 billion euros of maturing debt next year with big redemptions starting in late January. It has promised to balance its budget in 2013 but yesterday's auction suggested it will struggle to keep borrowing costs under control without international help.
Italian daily La Repubblica said EU Economic and Monetary Affairs Commissioner Olli Rehn would tell eurozone ministers that Italy needs to unveil fiscal measures worth 11 billion euros immediately to meet its target.
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