Bond auction success
A bond auction yesterday of Italian twelve month bonds yielded better than expected demand and halved interest rates.
The Italian government were able to sell €12 billion in bond, way above their original target, at a yield of 2.735%; that is about half the yield they were achieving in December when it reached 5.952%.
On the back of this news the Euro rose against the dollar and stock markets across the world responded positively.
Although the auction was deemed a great success, these are short term bonds and the real test will come when the government attempts to sell 10 year bonds. The yield will need to be well below the 7% danger point that tipped Ireland, Portugal and Greece into seeking EU/IMF bailouts.