Italy Cancels August Bond Auction
Citing the most hilarious explanation we have ever heard for not daring to approach the capital markets, Dow Jones reports that following a comparable announcement from Austria earlier, none other than clutch euro Domino Italy, whose bond yields surged by about 40 bps today, has decided to take a sabbatical from accessing capital markets, and will not issue medium and long-term bonds in August. Of course, the real reason is that the spreads are prohibitively high but that's a story for another reason. The problem for Italy, however, is that it will end up burning through a lot of cash over the next 45 days and then far more will depend on the successful passage of the country's auctions in the following month, when the next scheduled medium term auction is on September 13 (full auction schedule is here). Amusingly, while all of Europe complains that the Greece, Ireland and Portugal have no capital markets access, some of the better of PIIGS make the voluntary decision to avoid price discovery. We fail to see how this can possibly result in anything than another loss of credibility in the eurozone rescue package.
From Dow Jones:
Italy will cancel its mid-month auction for medium and long-term bonds, known as BTPs, "considering the large cash availability and the limited borrowing requirement," the Treasury said in a statement Monday.
The 12-month Treasury bills will be offered, it said. The T-bill auction is scheduled August 9.
Here is the first August auction to be cancelled. We expect many more to shortly follow the same fate.
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