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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Irish66's picture

Portugal is very ugly, GDP

jdelano's picture

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

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.

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

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

Ghordius's picture

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

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

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

Ghordius's picture


which is an "hawkish" move, by the way

Esso's picture

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

"Pass" the Skittles.

Ghordius's picture

well, we are in a "unicornish" transitional phase

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.

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"

disabledvet's picture

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

Cassandra Syndrome's picture

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


Implicit simplicit's picture

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

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...

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

HD's picture

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

FunkyMonkeyBoy's picture

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


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.

tarsubil's picture

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

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.

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.

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!

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.

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.

Bartanist's picture

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

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.

Tuffmug's picture

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

Dick Darlington's picture

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

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...

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.

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.

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

Kokulakai's picture

The deeds of the EU shall repay in kind.

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.

Ghordius's picture

somehow this also fails to scare me

had some 'talians in '83 at 16%

littleguy's picture

they also had Lira then.

Ghordius's picture

which, at one time, was one pound of silver

Great Unwashed's picture

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

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... 

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?)

bernorange's picture

Uh Oh Spaghetti-Ohs...

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.

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 !! :

melanie's picture

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

melanie's picture

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

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.