Italian yields above 7% after lackluster auction

@CNNMoneyInvest December 29, 2011: 7:55 AM ET
Newly appointed Prime Minister Mario Monti gained final approval last week for a ?30 billion package of austerity measures.

Newly appointed Prime Minister Mario Monti gained final approval last week for a ?30 billion package of austerity measures.

NEW YORK (CNNMoney) -- Weak demand for long-term Italian bonds at its final auction of the year Thursday sent the yield of the country's 10-year debt above the troubling 7% level.

Overall, the auction sold just over €7 billion, or about $9 billion, of long-term bonds, out of an offering range of between €5 billion to €8.5 billion.

Italy will end up paying slightly less for these bonds than at its previous auction a month ago. The auction of 10-year bonds drew a yield of 6.98%, down from 7.56%. But in trading Thursday, the yield on the Italian 10-year edged up to 7.07% from just under 7% the previous day.

A yield of 7% or more for 10-year bonds sets off warning bells among investors since that's widely seen as an unsustainable level that can force a country to seek a bailout, as was the case in Portugal, Ireland and Greece.

Italian yields first topped 7% in November amid fears that Italy could be the next to need a bailout. But yields dropped sharply in the first week of December on hopes that a "fiscal pact" reached by European leaders would become the much needed solution to the long-running debt crisis.

They edged back above the 7% mark a week ago as worries about Italy's bloated debt resurfaced, even as Prime Minister Mario Monti secured final approval for a €30 billion austerity plan.

As the eurozone's third-largest economy, Italy is considered too big to fail. At the same time, with debts of €1.9 trillion, the country may also be too big to bail out, leaving investors on edge.

On the bright side, yields on shorter-dated debt showed marked improvement. The auction of 3-year bonds yielded 5.62%, down from from 7.89% a month ago.

Hopes for a stronger long-term auction were raised Wednesday when the yield for the 6 month notes dropped by more than half to 3.278% from 6.608% a month ago, while the 2-year yield dropped to 4.853% from 7.814% To top of page

Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.