Italian Debt Sale May ‘Feel the Heat’ on Greece Woes

[Joanne98]

By Anchalee Worrachate

April 29 (Bloomberg) -- Demand for Italy’s bonds, a bellwether for securities from Europe’s most indebted nations, may fall at an auction today on concern the financial crisis in Greece is engulfing other countries in the region.

Italy plans to raise between 5.5 billion euros ($7.2 billion) and 8 billion euros by selling debt maturing in 2012, 2017 and 2020, according to the Treasury. Among peripheral euro governments, it’s the first sale since Standard & Poor’s cut Greece’s credit rating to junk, downgraded Portugal by two steps and lowered Spain by one level this week. Yields on Italian bonds rose yesterday to the highest since April 2009 relative to benchmark German bunds.

“Italy will feel the heat given contagion is rife,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate and Investment Bank in London. “It would be fantastic if the sale goes well as Italian bonds are normally the safest among euro-zone higher yielders. I don’t see that happening right now. I don’t envisage a failed auction, but it’s not going to be easy.”

Peripheral-nation bonds slid this week as the downgrades of Greece and Portugal two days ago and Spain’s reduction yesterday heightened concern that some nations in the region may struggle to repay debt. The difference in yield between Greek 10-year securities and bunds rose yesterday to 827 basis points, or 8.27 percentage points, the most since at least March 1998.

http://www.businessweek.com/news/2010-04-29/italian-debt-sale-may-feel-the-heat-on-greece-woes-update1-.html

[Joanne98]

1. Italy 7.7 bln eur bond sale gets market thumbs-up

* Yields on 2, 7, 10-year paper in 1.63-4.09 pct range

* Bid-cover ratios 1.39-1.80

* Ten-year spread vs Bunds holds steady

* Result 'a big vote of confidence from market'- analyst


LONDON, April 29 (Reuters) - Italy's sale of 7.7 billion euros of government bonds drew solid demand at relatively modest yields on Thursday, in a vote of confidence in the euro zone peripheral benchmark issuer's ability to withstand contagion from Greece.

Italy, which has the deepest and most liquid bond market among non-core sovereign issuers, was the first among the periphery to auction paper after a flurry of ratings downgrades from Standard & Poor.

The ratings agency this week cut Portugal and Spain and slashed Greece to junk status, spurring a wave of selling in peripheral bonds.

The Italian sale of two-, 10-year BTPs and seven-year paper drew bids for 1.80, 1.39 and 1.76 times the amounts on offer, respectively.

Yields ranged from 1.63 percent to 4.09 percent, compared with a range of 1.13 percent to 3.96 percent the last time the papers were sold in March..

"This is a big vote of confidence from the market. Italy have got the top end of the range away, and both of the (main) auctions have healthy bid cover ratios," said Peter Chatwell, a strategist at Credit Agricole in London.

http://www.forexpros.com/news/interest-rates-news/italy-7.7-bln-eur-bond-sale-gets-market-thumbs-up-133828

This is strange. Who would be buying Italian bonds right now.