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Italian 10 Year Bond Auction Prices At Record, Over 6%

Tyler Durden's picture


Earlier today Italy had an extended bond auction in which it sold 3, 6, 8, and 10 year bonds. The auction did not go quite as planned. The reason: far less than the maximum €8.5 billion target was raised, all the Bids to Cover slid and all the yields soared with a particular emphasis on the 10 Year BTP which everyone is following with great interest as it sternly refuses to trade inside of 6% despite all the worthless promises with the word "trillion" in them, lobbed in Italy's general direction from Europe, which knows too well that if the Italian bonds complex goes, so does the rest of Europe. As Reuters summarizes: 'Italy paid the most since joining the single currency to sell new 10-year debt on Friday in the first euro zone bond auction after European leaders agreed new steps to tackle the debt crisis. The auction yield on Italy's March 2022 BTP bond rose to 6.06 percent from 5.86 percent a month ago."  So... when is the next "Italy bailout" summit?

Details of the auction:

  • Total EU7.9b sold, maximum total target was EU8.5b.
    • 3-yr EU3.1b sold, average yield 4.93%, bid-to-cover 1.35
    • Average yield of 3-yr auction on Sept. 29 4.68%; bid-to-cover 1.37
    • Average yield of last six 3-yr auctions: 3.985%: average bid-to-cover 1.38
  • 10-yr EU2.98b sold, average yield 6.06%, bid-to-cover 1.27
    • Average yield of 10-yr auction on Oct. 13 5.77%; bid-to-cover 1.48
    • Average yield of last six 10-yr auctions: 5.443%: average bid-to-cover 1.42
  • 6-yr floater EU1b sold, average yield 5.59%, bid-to-cover 1.98
  • 8-yr EU871m sold, average yield 5.81%, bid-to-cover 1.62

Reuters had more:

Italy's 10-year borrowing costs topped 6 percent for the first time since the launch of the euro more than a decade ago on Friday, as it held the first euro zone bond auction since European leaders agreed steps to tackle the debt crisis.


Analysts looked at the auction as a first important test of market reaction to the measures agreed at a summit on Thursday, which they said went in the right direction but left many questions unanswered.


Italian stocks widened losses after the sale with a trader citing the negative impact on investors' confidence of the psychologically sensitive 6 percent level for 10-year yields.


"The pressure on Italy to solve its debt problems is increasing. Markets are still sceptical about Italy and ... another more expensive auction can't be ruled out," said Christian Reicherter, an analyst at DZ Bank in Frankfurt.


The 10-year yield gap between Italian and German bonds widened after the auction to 378 basis points, about 10 bps wider on the day.


Analysts judged as positive the fact that the Treasury had managed to sell 7.94 billion euros of debt comprising conventional BTP bonds and a floating-rate CCTeu bond -- close to the top of its target range of up to 8.5 billion euros.


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Fri, 10/28/2011 - 07:53 | 1820224 Irish66
Irish66's picture

Portugal is very ugly, GDP

Fri, 10/28/2011 - 08:07 | 1820266 jdelano
jdelano's picture

When is the market going to realize that MS now has massive and basically completely unhedged exposure to Europe?

Fri, 10/28/2011 - 08:15 | 1820290 disabledvet
disabledvet's picture

at the same time they realize they've hedged it via the entire French Banking Industry. Perhaps her name was Charlotte? Or maybe it was just Duke.

Fri, 10/28/2011 - 07:54 | 1820225 Ghordius
Ghordius's picture

well, those bonds should be only of interest to Italian and French citizens and banks

I'd be very careful with them, both long and short. particularly if you want to go short

Fri, 10/28/2011 - 08:01 | 1820249 French Frog
French Frog's picture

this should be bullish as it will soon lead to another EU meeting (we haven't had one for a couple of days now) and they will replace 'trillion+' with 'trillions' in the communique and everything will be rosy forever after lol

Fri, 10/28/2011 - 08:11 | 1820263 Ghordius
Ghordius's picture

got to have an EU meeting "fix", eh?

Angie and Sarko meetings in the night do wonders for the economy

Fri, 10/28/2011 - 08:07 | 1820264 gojam
gojam's picture

But obvious really.

The Eurozone should have foreseen that if you make CDS pointless investors are going to want  higher interest to cover the extra risk

Fri, 10/28/2011 - 08:15 | 1820289 Ghordius
Ghordius's picture


which is an "hawkish" move, by the way

Fri, 10/28/2011 - 08:28 | 1820325 Esso
Esso's picture

Well, I say it's a "unicornish" move.

"Pass" the Skittles.

Fri, 10/28/2011 - 12:02 | 1821123 Ghordius
Ghordius's picture

well, we are in a "unicornish" transitional phase

Fri, 10/28/2011 - 08:38 | 1820363 Cursive
Cursive's picture


The Eurozone should have foreseen that if you make CDS pointless investors are going to want  higher interest to cover the extra risk

Great point, but that was expecting a lot from a group of financial illiterates who are more interested in navel gazing and political kickbacks than they are at making good policy.

Fri, 10/28/2011 - 08:43 | 1820379 gojam
gojam's picture

Funny you should say that Cursive.

Originally, I wrote "The Eurozone must have foreseen" but I had the same thought as you and I quickly edited it to "should have foreseen"

Fri, 10/28/2011 - 08:17 | 1820296 disabledvet
disabledvet's picture

I took note that the Bank for "International Settlements" has a couple hundred tons of gold as well.

Fri, 10/28/2011 - 07:54 | 1820226 Cassandra Syndrome
Cassandra Syndrome's picture

But, but Von Rumpuy and Barruso said everything is now fixed. This is nonsense.....


Fri, 10/28/2011 - 07:55 | 1820229 Implicit simplicit
Implicit simplicit's picture

Yeah, why own Italian, Spanish, Irish and Portugal bonds when Greece gets the break and guarantees and they don't,

Fri, 10/28/2011 - 08:09 | 1820272 Ghordius
Ghordius's picture

well, they do get support - the ECB will "bash" too low positions from time to time to "break" speculation, and then the EFSF will take over and then the ESM will take over and then we will have a new plan for a plan for a plan for...

Fri, 10/28/2011 - 09:31 | 1820531 Implicit simplicit
Implicit simplicit's picture

True, but they will have to do a lot of bashing if they are not going to honor the insurance CDS. ....and the painted ponies go round and round, we're all captured on the carousel of spiraling leveraged debt. no exit

Fri, 10/28/2011 - 07:55 | 1820230 HD
HD's picture

Now how did that happen? It's a mystery I tells ya...a real head scratcher.

Fri, 10/28/2011 - 07:56 | 1820232 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

I don't understand why ANYONE would lend ANY GOVERNMENT their wealth...


Fri, 10/28/2011 - 08:13 | 1820280 Bartanist
Bartanist's picture

Yes, of course. However, the hand that gives is above the hand that receives.

So, who actually has enough money to buy enough of the debt to make a difference for the government and hence purchase the loyalty (err soveriegnty) of the government? It is not "we, the people". It can only be banks who create their money out of thin air and have no practical limit to the amount of money and debt they fabricate.

Very little of the money given to lying, cheating, scummy governments/politicians comes from people who save ... and that is the biggest part of the problem. The whole world has been corrupted by the banks' and bankers' ability to fabricate fiat, put their tax on the world and then embezzle and bribe.

Fri, 10/28/2011 - 08:19 | 1820299 disabledvet
disabledvet's picture

"You're welcome."

Fri, 10/28/2011 - 09:41 | 1820559 tarsubil
tarsubil's picture

Exactly, my first question is who the heck is buying this shit?

Fri, 10/28/2011 - 07:56 | 1820233 Mitch Comestein
Mitch Comestein's picture

Lets play acronym hangman.  Let's see.  We have a G already.  The next letter has to be I.  We will have G. I.  What comes after that.

Fri, 10/28/2011 - 08:16 | 1820294 HD
HD's picture

a HUGE enema...

Fri, 10/28/2011 - 07:58 | 1820235 ArkansasAngie
ArkansasAngie's picture

I think we may actually be hitting a road bump. 

If you're trying to manipulate a market and suckers refuse to be patsies, then the fraudsters are just trading money amongst themselves.

The first stage of fiat destruction ... folks aren't willing to take it in echange.

"They" may have fooled 70% of the people ... but that 71% to 98% of the people have got their fingers on their noses.

Not with my money arsehole.

Fri, 10/28/2011 - 07:57 | 1820237 GerritB
GerritB's picture

but but but but but.......they fixed everything......?

this is getting ugly...

the can is now officially a rock that hurts if you want to kick it!

Fri, 10/28/2011 - 07:59 | 1820242 Bartanist
Bartanist's picture

This is of course not unexpected when the goal is to make it seem as is the individual countries cannot go it alone and need to "willingly" cede their power and sovereignty to a central European bank and central bank controlled European goverment.

... in the end, the muppets who have been put in charge of the various countries will have it assigned as their jobs to do what politicians always do: "sell out their constituency" for the benefit of the elitist oligarchy.

Fri, 10/28/2011 - 07:59 | 1820243 Christoph830
Christoph830's picture

Just goes to show that sometimes the best course of action is no action. Greece should have been left to fail. That would have incentivized the Italians to implement actual austerity.

Fri, 10/28/2011 - 08:15 | 1820287 Bartanist
Bartanist's picture

... and yet, there is a difference between austerity and sensibility. The problem with austerity is that the wrong people suffer.

Fri, 10/28/2011 - 08:18 | 1820300 Christoph830
Christoph830's picture

One more thing: In negotiations, you are supposed to over-demand and then settle somewhere in the middle. By only asking Greek creditors for a 21% haircut the first time and now 50%, the ECB has lost all leverage going forward because the next time Greek creditors are approached for a further haircut (which is inevitable), they are going to point to the first two rounds of cuts and say "no more!". Colossal misjudgment.

Fri, 10/28/2011 - 08:30 | 1820322 Tuffmug
Tuffmug's picture

Next haircut will be 100% via guillotine! Wonder how they will spin that one as voluntary??

Fri, 10/28/2011 - 07:59 | 1820244 Dick Darlington
Dick Darlington's picture

Spain unemployment rose to 21,5% in Q3 according to figures released today.

Fri, 10/28/2011 - 08:02 | 1820253 Ghordius
Ghordius's picture

does not scare me

what scares me is the youth unemployment which is some 40%

still, you have to take it with a grain of salt, lots of submerged economy in Spain, otherwise the millions of North Africans that help in agriculture would have to be counted, too...

Fri, 10/28/2011 - 08:05 | 1820260 Dick Darlington
Dick Darlington's picture

Yep, the youth UE figures are worrisome and it's not just in Spain. Many other economies in Europe face the same problem even if the "general" UE figures are more decent than Spain's.

Fri, 10/28/2011 - 08:10 | 1820274 littleguy
littleguy's picture

Youths revolt, old fogies have assets to fall back on.

Watch unrest kick in, EU-member national governments fail, austerity switched off because socialist / communist / green parties get voted in, and within 1 year €uro "ist kaput". Germany leaves, France fails, depression --> potential for civil wars in outlying countries. War might be hard to predict at this stage, but the fiesty southern Europeans have it in them to kick up a serious fuss. It's textbook.

Fri, 10/28/2011 - 08:20 | 1820281 Ghordius
Ghordius's picture

most of this I see as pure propaganda and wishful thinking

mostly to keep eyes off USD and GBP

and mostly from people who have no clue about the EZ

but hey, some are heavily into a strong dollar for december, so hedge accordingly

Fri, 10/28/2011 - 07:59 | 1820245 Kokulakai
Kokulakai's picture

The deeds of the EU shall repay in kind.

Fri, 10/28/2011 - 08:01 | 1820250 PaperBear
PaperBear's picture

"European leaders agreed new steps to tackle the debt crisis."

Italian bonds set record 6%, looks well tackled this debt crisis, not.

Fri, 10/28/2011 - 08:05 | 1820258 Ghordius
Ghordius's picture

somehow this also fails to scare me

had some 'talians in '83 at 16%

Fri, 10/28/2011 - 08:11 | 1820276 littleguy
littleguy's picture

they also had Lira then.

Fri, 10/28/2011 - 08:13 | 1820284 Ghordius
Ghordius's picture

which, at one time, was one pound of silver

Fri, 10/28/2011 - 08:36 | 1820357 Great Unwashed
Great Unwashed's picture

Interest rates were high back then. The US 10yr yielded 14% in '83. This is not at all the same.

Fri, 10/28/2011 - 08:07 | 1820267 A Man without Q...
A Man without Qualities's picture

Of course, what has been glossed over is that Germany and France demanded Italy take meaningful action, and the Italians made a couple of promises - raise retirement age by two years, but gradually over 14 year; and sell some state assets - which is going to save, €5bn per annum.  Now, when you've got €1.3 trillion of debt, does that seem meaningful?

Anyway, it's no big deal, Sarko's mates made so much money from the recent rally, I am sure they can bail everyone out... 

Fri, 10/28/2011 - 08:04 | 1820257 El Gordo
El Gordo's picture

I can't believe that you all are still talking about this stuff.  Don't you know the crisis is over - just look at what the stock market did yesterday.  No problem, go back to sleep.  Smarter people that us are working overtime to take good care of us.  (Just because you see their hand in your wallet doesn't mean they intend to take it all, does it?)

Fri, 10/28/2011 - 08:05 | 1820259 bernorange
bernorange's picture

Uh Oh Spaghetti-Ohs...

Fri, 10/28/2011 - 08:05 | 1820261 The Axe
The Axe's picture

Positive  somehow I guess, This news flow that shows the flood, only leads to a higher Euro and stronger equity markets....It leaves the brain frozen in a state of disbelief.

Fri, 10/28/2011 - 08:06 | 1820265 lemosbrasil
lemosbrasil's picture

Return line of that trendline broken in august was tested yesterday !! Yeah !!! It seems crazy, but they were there !!! TEST return line !!!!

See here !! :

Fri, 10/28/2011 - 08:10 | 1820273 melanie
melanie's picture

And there goes Portugal: Europe's rescue euphoria threatened as Portugal enters 'Grecian vortex

Fri, 10/28/2011 - 08:13 | 1820282 melanie
melanie's picture

The Economist: Euro rescue has more holes than a Swiss cheese

Fri, 10/28/2011 - 08:20 | 1820285 Tuffmug
Tuffmug's picture

Why buy new issue bonds now when you can wait till ESFS up and running and gives you 20% insurance. Euro zone shooting themselves in the foot, creating two classes of bonds, one with and one without insurance, and destroying the CDS market. Merkel, Sarkozy, et. al. should be required to wear clown makeup in public.

Fri, 10/28/2011 - 08:19 | 1820297 agent default
agent default's picture

50% haircut and no CDS trigger.  Seriously what else did you expect?

Fri, 10/28/2011 - 08:20 | 1820303 LawsofPhysics
LawsofPhysics's picture

Winning!  Hold any government paper at your own risk.  How in the hell is gold not at $10,000 an ounce yet?  The paper-pushing fucksnuts really screwed the pooch on this one.  Fine with me, crash the fucking system and let's find out exactly what the value of everyone's labor really is and correct some obvious compensation problems.  Fucking bring it.

Fri, 10/28/2011 - 08:20 | 1820305 Archimedes
Archimedes's picture

Forget Portugal and Spain, the next logical target for Bond vigilantes (If they truly exist) is Italy.

Now that The ECB has rendered Soveriegn CDS useless the attack will switch to Italy because they have the worst debt to GDP in the land and they need about 400 Billion or more in capital. Why is this significant? Because that is the entire EFSF pot. And since that is what the ECB are leveraging 4 to 1 (which they have not fully explained how they will do that) once you use up the EFSF the leverage firepower dissappears.


Fri, 10/28/2011 - 08:21 | 1820308 luigi
luigi's picture

Now the clown can boast that our bonds sell at high price! MUAHAHAHA!

Fri, 10/28/2011 - 08:22 | 1820310 The Axe
The Axe's picture

INSIDER SELLING   Yesterdays  crazy rally brought out a huge amount of insider selling, excluding the 5,000,000 MSFT sold by Bill Gates  nice 134,000,000 million sale..other and many insiders sold yesterday. The most that I have seen in many,many days

Fri, 10/28/2011 - 08:24 | 1820314 Tense INDIAN
Tense INDIAN's picture

check out the counts in NIFTY . ...after this X will come the Y which should coincide with the 3rd of the SnP ...also approaching the resistance line at around 5430 ...and 200MA::

Fri, 10/28/2011 - 08:25 | 1820317 disabledvet
disabledvet's picture
doesn't get any better save for Shakespeare himself:
"Parting is...such sweet sorrow."

Fri, 10/28/2011 - 08:25 | 1820318 vegas
vegas's picture

Every time I see posts like this I laugh at the chuckleheads who lend this country money.

Hell, I wouldn't lend them at 10% let alone 6. Is there any doubt in anyones mind that there is no way in 10 years this piece of shit paper is going to be paid off. Like the rest of the PIIGS in Europe this is nothing more than begging and promising to pay whatever just to get the money. After that, who cares? Italy isn't going to restructure itself to make any difference.

All they do is rearrange the deck chairs on the Titanic, while the music plays, to make everyone feel calm and not panic.

Surreal to watch this shit happening and wonder where the adults are.

Fri, 10/28/2011 - 08:37 | 1820349 Great Unwashed
Great Unwashed's picture


Fri, 10/28/2011 - 08:47 | 1820392 DavidJ
DavidJ's picture

All these bailouts are d*mn complicated.  It all adds to the perception that the system is becoming a bunch of funny money.   Confidence in the system is waning!


Watch out!

Fri, 10/28/2011 - 10:14 | 1820664 Eurodollar
Eurodollar's picture

Out of the politican can kicking portfolio and I am going to rid myself of my little value basket also after a nice ralley lately. Why? Italy and Spain. Zerohedge is spot on in reporting the techincalities. You don't need buy your Phd from Russia to understand that the fundamentals of these economies are derailed trains of pain. I have lived much of my adult life in southern Europe and the story is the same wherever you go. Work ethics are horrible, I UNDERLINE horrible. They obviously beg to differ with that view, which they of course are allowed as it is almost a free world, but I am not going to listen. There is also a broad sense of socialism in regards to distribution of social goods and services. People here really believe they are "worth it", but they don't understand what is needed in the REAL WORLD to get the benefits they actually do. It has also been way to easy to get loans for pretty much anything based on the value of property. Southern Europe has had a property boom that in many ways have started its spiral downwards but banks and other financial institutions that have marked the loans that bought these properties to the unicorn model are fighting to face the market value of the crappy assets they have on their balance sheets. Take Greece, Cyprus, Spain and others. It looks outright grim and it is going to get a hell of a lot worse. There is hardly any demand with the western world tap dancing on the borders of recession. As of now they keep it together as it in the interest of the government, the banks and the developers, but it doesnt take much of a further contraction before it is good night. Just think about Spain! Not much production or industry really. Big service industry (tourism) that has a big chance of seeing lower demand due to high unemployment domestically and in key markets. Over 20% unemployment. Big issues looming in the regional debt as well as the balance sheets of the banks filling them up with unicorn marked assets. Add that they now have learnt how to get a write off from the greek tragedy and one will have a hair or two in the soup rather quickly.

On a bright note; if we play our aces well we can get wonderful med properties for 30 cents on the dollar :) ahhh, life can be good when you let it.

BungaBunga to all!!

Fri, 10/28/2011 - 11:48 | 1821033 cranky-old-geezer
cranky-old-geezer's picture



I wouldn't buy Italy 10 yr bonds at 20% yield.  In 5 yrs the Euro will be toilet paper if not gone completely.

Fri, 10/28/2011 - 12:01 | 1821113 Ghordius
Ghordius's picture

you always give me the impression of someone that thinks the same way I do

thanks for the wonderful avatars

well, I had some at 16%, but it was quite a while ago!

In 5 yrs? that's a loooooooong time nowadays!

no, I think not, though I would not be astonished if we will need a couple of hundred EUR or USD for a coffee...

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