Ugly Italian Bond Auction Which Fails To Meet Issuance Targets Follows Atrocious German 5 Year Bobl Auction

Tyler Durden's picture

Anyone who thought that yesterday's atrocious 5 Year E5 Billion bobl auction was a one off fluke may need to reevaluate after today's even uglier Italian bond auction which was not a failure in all but name, after the Italian Treasury raised far less than was targetted. As a result, Italian bonds have slumped, extending losses from earlier this morning. That said, we expect a near-term kneejerk reaction once the German EFSF vote ratifies as is broadly expected. Specifically, per Bloomberg, the 10-yr yield hit 5.69% after auction from 5.66% pre-auction; now steady at 5.66%, +2bps from yesterday, it also sold EU1.3bln vs targeted EU2bln on bonds due August 2021; Italy sells EU2.47bln vs targeted EU2.5bln bonds due March 2022 with avg yield of 5.86% vs prev 5.22%; 2-yr yield +3bps to 4.4% vs 4.37% pre-auction. The govt sold EU3.14bln due July 2014, less than the targeted EU3.5bln bonds; avg yield of 4.68% vs prev 3.87%; 5-yr yield +6bps to 5.08% vs 5.07% pre-auction Italy sold EU926m vs targeted EU1bln bonds due December 2015.

Full breakdown:

Sold EU7.86b, maximum target EU9b.
3-yr target EU3.5b,  EU3.14 sold
3-yr avg yld 4.68% vs 3.87%, bid-to-cover 1.36 vs 1.32 last auction
3-yr average of last six auctions: 3.745%, 1.372 bid-to-cover

10-yr target EU2b,  EU1.32 sold
10-yr avg yld 5.49% vs 5.47%, bid-to-cover 1.58 vs 1.49 last auction
10-yr average of last six auctions: 5.162%, 1.397 bid-to-cover

11-yr target EU2.5b, EU2.47 sold
11-yr avg yld 5.86% vs 5.22%, bid-to-cover 1.37 vs 1.27

4-yr target EU1b, EU926m sold
4-yr floater avg yld 5.63% vs 4.58%, bid-to-cover 1.88 vs 1.79 last auction