Forexpros – Italy saw borrowing costs climb to the highest level since December at an auction of two-year government bonds on Tuesday, amid fading hopes an upcoming summit of European leaders would yield meaningful results.
Italy’s Treasury sold EUR2.99 billion worth of two-year government bonds maturing in May 2014 at an average yield of 4.712% earlier in the day, the highest since December and up from 4.037% at a similar auction last month.
Demand weakened slightly, with bids exceeding supply 1.652 times versus a “bid-to-cover” ratio of 1.66 in May.
Italy’s Treasury planned to sell between EUR2.5 billion and EUR4.0 billion of government bonds.
The yield on Italian 10-year bonds rose to 6.07% following the auction, up from 6.02% hit Monday.
Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations to fund themselves.
Meanwhile, the euro remained lower against the U.S. dollar, with EUR/USD easing down 0.12% to trade at 1.2489.
European stock markets remained broadly lower. Italy FTSE MIB Index fell 0.8%, the EURO STOXX 50 dropped 0.4%, France’s CAC 40 declined 0.5%, Germany’s DAX slumped 0.25%, while London’s FTSE 100 shed 0.2%.
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