Italy hits target amount at first debt auction of 2013

MILAN Thu Dec 27, 2012 10:54am GMT

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MILAN (Reuters) - Italy sold all the bills and bonds it aimed to at an auction on Thursday, a few days after outgoing Prime Minister Mario Monti announced he may join the election race to lead a reform-minded centrist alliance.

Borrowing costs edged up slightly on the short-dated paper while they fell on the two-year bonds as heavy redemptions helped Rome raise the top-targeted 11.75 billion euros (9.59 billion pounds) at the first debt sale to be settled in 2013.

"The outcome of the sale is positive as the yield rise seen on bills was really limited," said Luca Cazzulani, fixed-income strategist at UniCredit.

The treasury issued the targeted 8.5 billion euros of six-month bills, paying a yield of 0.949 percent, slightly up from 0.919 percent at a similar auction one month ago.

Rome also sold 3.25 billion euros of two-year zero-coupon bonds at a yield of 1.884 percent, down from 1.923 percent in November.

Italian political uncertainty has shown no sign of feeding through into the country's borrowing costs yet.

Mario Monti, appointed to lead an unelected government of experts to save Italy from financial crisis a year ago, resigned on Friday but has faced growing calls to seek a second term at a parliamentary election on February 24-25.

The former European commissioner said on Sunday he would consider doing so if approached by allies committed to backing his austere brand of reforms.

A twitter message from Monti on Wednesday about his intentions to "rise to politics" provoked harsh comments by centre-right supporters of former premier Silvio Berlusconi, hinting to a bitter election campaign ahead.

On Friday, Rome will offer up to 6 billion euros of five- and 10-year bonds in its debut on longer-dated paper sale for 2013.

Analysts estimate Italy will have to borrow around 420 billion euros in 2013 to fund its 2 trillion euros debt.

That represents a 10 percent lower total than in 2012 but uncertainty surrounding February elections and their aftermath could cause jitters, making it difficult for Italy to get ahead of the game in terms of meeting its financing needs for the year.

(Additional reporting by Gabriella Bruschi and Giulio Piovaccari, editing by Mike Peacock)

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