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UPDATE 1-Italy's six-month debt costs ease at auction
September 26, 2012 / 9:42 AM / in 5 years

UPDATE 1-Italy's six-month debt costs ease at auction

(Adds analyst’s comment)

MILAN, Sept 26 (Reuters) - Italy’s six-month borrowing costs fell at auction on Wednesday, although doubts about whether Spain will ask for a bailout soon could hurt Italy at a bigger auction on Thursday, analysts said.

Six-month yields fell to 1.503 percent, the lowest level since March, down from 1.585 percent paid by the Treasury on the same maturity at end-August auction.

“The yield fell from the previous auction but yesterday on the grey market the same bills yielded 1.3 percent. Today the market was not at its best: there is nervousness about Spain,” said Alessandro Giansanti, bond strategist at ING.

Spain’s Prime Minister Mariano Rajoy said on Wednesday he was ready to seek a new rescue package for his troubled country but only if its debt financing costs remain too high for too long.

“The uncertainty could add to pressures as investors get ready for another Italian bond auction tomorrow,” Giansanti said.

On Wednesday, Rome sold 9 billion euros of bills with bids totalling 1.39 times the offer, down from 1.69 last month.

The Treasury faces a bigger market test on Thursday when it offers up to 7 billion euros in five- and 10-year bonds together with floating-rate certificates.

Ten-year Spanish government bond yields jumped 22 basis points to 5.99 percent on Wednesday and borrowing costs over two years firmed 22 bps to 3.45 percent.

Italian funding costs over 10 years edged 13 basis points higher to 5.23 percent, and its two-year yields rose 16 bps to 2.72 percent. (Reporting by Francesca Landini; Editing by Hugh Lawson)

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