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

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.