Italy Auctions 10.5b Euro 6m/2y at High Yield

By William L. Watts LONDON (MarketWatch) -- The Italian Treasury on Thursday auctioned 8.5 billion euros ($11.3 billion) of six-month Treasury bills and 2 billion euros of two-year debt. Bids for the six-month T-bills exceeded supply 1.63 times, with the auction producing an average yield of 1.48%, up from 1.20% in an auction last month. The rise in borrowing costs was subdued given recent pressure on peripheral bond markets, said Chiara Cremonesi, fixed-income strategist at UniCredit Bank. A Spanish auction of six-month debt earlier this week saw borrowing costs rise more than 80 basis points from a previous auction to 2.11%. Italy's two-year auction produced a gross yield of 2.31%, up from 1.77% at an October sale. While volatility may remain high, the results confirm "that despite contagion fears, Italy remains perceived as the safest among periphery and that demand for Italian paper remains sound," Cremonesi said