"No man can become rich without himself enriching others"
Andrew Carnegie



Friday, July 13, 2012

Italy faces bond sale test after Moody's downgrade

Moody's Jewelry Neon Sign
Moody's Jewelry Neon Sign (Photo credit: Lost Tulsa)
comItaly's auction of up to 5.25 billion euros in bonds on Friday looks altogether more testing after Moody's cut its rating on the euro zone's third-largest economy to just two notches above junk status.

The agency downgraded Italy's sovereign rating by two notches to 'Baa2', citing rising risks of higher funding costs and a loss of market access. It warned it may cut it further. The unexpected move weighed negatively on Italian bonds in early trade but a new three-year bond on sale on Friday still traded at levels which pointed to a fall in the cost of borrowing from a month ago. "The (Italian government bond) futures have opened sharply lower, we have a tough day ahead of us," an Italian bond trader said. "The negative outlook is particularly worrying." Ten-year Italian government bond yields rose 13 basis points to 6.04 percent, while five-year yields were up 15 bps to 5.55 percent in response to the Moody's action. The Treasury is offering a new July 2015 bond carrying a 4.5 percent coupon and new tranches of three bonds due in 2019, 2022 and 2023 that are no longer issued on a regular basis. ... Continue to read.
Enhanced by Zemanta