Italy Sells 4, 5, 7 And 10 Year Bonds: Yields Jump, Bids to Cover Slump: Market Commentary

Tyler Durden's picture

While Europe is still keeping up a facade that all is well in the aftermath of the Spanish downgrade, but far more importantly its sheer economic collapse as noted earlier, just so Italy could price €4.916 billion in two On The Run 5 and 10 year bond issues (compared to a target of €5 billion), the tension is there, as can be seen in a decidedly week Italian bond auction, which saw yields soar, Bids to Cover slide, and tails spike. Italy also sold less than the maximum in off the run 2016 and 2019 bonds. All in all, while the market may experience a brief recovery rally that Italy managed to sell anything at all (that was not a Bill of course - that gimmick always does the trick), the reality that these yields are not sustainable will slowly seep in within a few hours.

To wit, Italy sold:

  • €2.5 billion of 5.5% 2022 bonds at a yield  of 5.84%, a whopping tail to the trading price of 5.74%, much higher compared to the March 29 auction of 5.24%, and a weaker Bid to Cover of 1.48 compared to 1.65 before.
  • €2.42 billion of 4.75% 2017 bonds at a yield of 4.86%, also much higher compared to the March 29 auction of 4.18%, and a far weaker Bid to Cover of 1.34 compared to 1.65 before.

Also, the country sold €1.03 billion in Off The Run 2016 and 2019 bonds, well less than the target size of €1.25 billion, as follows:

  • €537mln of 2019 bonds at yield of 5.21%
  • €493mln of 2016 bonds at yield of 4.29%

So... bonds that are just out of the LTRO's maturity are yielding 4.3%? And that for the fulcrum country of Italy? And there are still those who think the ECB will not do many many more indirect and direct monetizations...

The immediate spin is as follows, via Reuters, which apparently focuses that the debt sold at all, as opposed to such actual fundamentals as unsustainable yield, sliding bid to cover, and, oh yeah, a 10 basis point tail. But who needs fundamentals when one has the central planners such as the BOJ injecting random trillions into the market at a whim.


"It looks better than the market expected because there were quite a few negative comments coming after the Spanish downgrade."

"The 5.9 (billion euros) number is pleasing the market for now. Any number below five would have created a bit of a problem for them."

"In this environment, domestic banks are probably supporting the auction and that has been a feature for Italy since the start of this year."


"Overall the figures look okay, a decent auction. The bid/covers don't look great but they are in line with the averages so far this year. Volumes seem alright and both issues are overbid compared with secondary market levels.

"To sum up, at least no further bad news, nothing to provide further fuel to the sell-off we have had in periphery paper this morning."


The auction was "reassuring in that any fears of a very poor outcome were misplaced. However, these acceptable results certainly came at a price which, in turn, leaves a question mark over how long Italy will be able to finance itself at levels that can be deemed sustainable."


"The issue was always going to be how close to the top of their target would they sell. At 5.95 billion (euros) they are very close to what was a very wide band, which is great."

"The cover is fine but it's not amazing. It never is for Italy. The more impressive part was where the selling yields were struck relative to where the secondary market was at the closing time of the auction. With the exception of the '19s, everything was sold four to six basis points below market levels so it was bid up which was very encouraging."

"But ultimately we are selling at the highs of recent months...What the whole thing tells is domestic demand remains strong...That was always going to help this sale."

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Sudden Debt's picture

Yep, there are still MORONS WHO BUY THAT SHIT!!


StychoKiller's picture

I'm gonna have to watch Domokun, just to see WHY (s)he's waving them arms in such a panic! :>D

Ghordius's picture

SD, I said the same in the 80's, and here we are... of course you know it's mostly elderly Italians and French & Italian banks...

CPL's picture

Yeah, but if everyone is broke and their credit facilities are getting knee capped.


Who other than the same government and their regional central bank would buy the debt and bonds?  Name a single person that's insane enough to do so.

whirlybird rules's picture

ECB= arrogance of old world aristocrats + stupidity (inbreeding of same?)

FinalCollapse's picture

SD - Morons? They (ECB/FED) set up multiple proxy companies. Give each one a billion euro and they will buy some bond ETF. The ETF will buy these sovereign bonds at the auction. By the end of day these proxy companies are shutting down and there is no trace of the funny money. No problemo. I could do it myself if I had access to funny money. Who is going to prove that ECB transfered billions to temporary companies that blow the money in one day and then disappear? Who is going to catch this fraud?


Confundido's picture

No trace of the funny money? Who warehouses the fucking bonds they bot with funny money, if they close? Unless you suggest they resell them, but then again, that doesn't solve the oversupply problem...

sockratte's picture

funny comments...

falak pema's picture

Its time for Italy to tell its Oligarchs to pull their money back from Swiss land and to buy country debt; not rely on a foreigner run market. Its back to the Renaissance days and the city states of Italy have to go joint and several in name of Patriotisim and "we the people"; if they don't want the Charles V and the French to meddle in their affairs, aka the global hegemony of Oligarchy markets, new Imperial rulers of financial world.

They got it wrong then, relying on the POPE to save their skins. He was a total shill, worse than the others, a bit like Super Mario at ECB and his henchman Mario of Monti. So....Can they get it right this time?

I doubt it; de Vinci emigrated to France, like Carla Bruni! That says it all. The money will probably stay in Swiss land and the Italian sheeple go from 1000 Euro/month category sheeple to 500 euro category, to join their Greek and Spanish brothers at 300 and 400 respectively. Next in line for mega haircuts : France and Germany! 

The war of religions is now getting serious in First World, fight for Pope, fight for King, fight for Empire; ALL SINGING WE DO THIS IN THE NAME OF THE PEOPLE. FOR THEIR BENEFIT..what a total sham!


Ghordius's picture

falak, Italy has something like one million entrepreneurial families (of all sizes down to the taxi drivers), an incredible number for a country this size - telling them to buy Italian Bonds is akin to ask all American libertarians to buy USTs - they have very, very similar points of view. Having said that, Berlusconi did something similar with his "Scudo Fiscale", where "black" money could be repatriated for a paltry 5% tax fine. The Italian State collected some hundred billions from that...

You forgot to mention Caterina de' Medici, who brought to France the customs of using table "serviettes" and cutlery - she had the time of her life teaching the French Royal Court how to use a fork...

falak pema's picture

lol, she did a good job of teaching them how to use their knives during the Saint BArthelemy..."Kill em all so that none remain to reproach me of my sins", said her son, King Charles IX, when she insisted that he give his go-ahead to the conspiracy of the Guises. 

Yes Italy is still Renaissance and city-state entrepreneurial, never a nation, inspite of Garibaldi. In fact, when Napoleon invaded Italy it was to "restore" national values to Caesar's Italy, make it a modern state. Garibaldi followed in his footsteps. I suppose Mussolini as well in a distorted sort of way...

Maybe Hollande will say the same thing to Monti...go modern Monti, and become Keynesian! It is Depression times and these bankstas ARE the crime. 

fonzannoon's picture

I read somewhere that Pimpco was buying this crap

Peter K's picture

Nice tail.  So does this make Mario the Booty Bandit?  :)

evolutionx's picture

ECB Fear Indicator near record

Banks deposited EUR 791,31 billion with the ECB Thursday, up from EUR 782,33 billion Wednsday. The number climbed five days in a row.

orangegeek's picture

Yep - Euro keeps incrementing up and the USD keeps incrementing down.  Amazing.


In Elliott Wave speak, we count the USD in wave 2 and ready to increase and the Euro ready to decline.

Peter Pan's picture

Like one of them said, "domestic banks are probably supporting this auction." A classic case of the dog eating its own vomit.

Is there no ending to ths pretending?

Oxygen's picture

Evolutionx :

ECB Fear Indicator near record

Banks deposited EUR 791,31 billion with the ECB Thursday, up from EUR 782,33 billion Wednsday. The number climbed five days in a row.

    What does it mean ?