29 Nov 2011

Italian government offers 7.2% interest rate

3:33 pm on 29 November 2011

The government in Italy had to offer an interest rate of 7.2% on Monday to attract buyers to its latest issue of 12 year bonds.

The rate was 4.5% at the last equivalent auction. A total of 567 million euros were sold.

However, the implied 10 year cost of borrowing, based on bond market prices, fell modestly by mid-afternoon on Monday, from 7.26% to 7.14%.

The BBC reports a level above 7% is widely considered unsustainable for Italy in the long-run.

On Tuesday, Italy will auction 8 billion euros of debt, including 10 year bonds.

With international investors increasingly wary of holding Italian debt, ordinary Italians are being encouraged to put their savings into government bonds.

Traders agreed to waive their fees for a day.

Also on Monday, Belgium sold 2 billion euros of government debt at auction, paying a yield of 5.7% on its 10 year bonds compared with 4.37% at an auction in October.