Italy's borrowing costs continue to fall as investors bet the European Central Bank will backstop the nation's massive bond market.
The Italian government sold €2.9 billion worth of 10-year bonds Thursday at a yield of 4.45%, down from 4.92% at the previous auction in October. It also sold €3 billion of 5-year notes at a yield of 3.23%, compared with 3.80% last month. Yields and prices move in opposite direction.
In the secondary market, yields on Italian 10-year bonds fell to 4.47%, near the lowest levels since the euro crisis erupted in 2011.
The results are a far cry from the record-high interest rates Rome was forced to pay earlier this year, when 10-year yields rose above 7%.
Italy has enjoyed favorable market conditions since the ECB announced plans to intervene in the bond market for countries that commit to an official economic and fiscal reform program.
Rome is not expected to tap the ECB's outright monetary transaction program, but the promise of potentially unlimited bond purchases has calmed jittery investors.
Spain has also benefited from the potential ECB intervention. Yields on Spanish 10-year bonds were trading around 5.34% on Thursday, down from highs above 7% in July.
The decline in Italy's borrowing costs comes despite tepid economic growth and an uncertain political outlook, with Prime Minister Mario Monti expected to step down next year.
"There's a degree of complacency about Italy right now," wrote Nicholas Spiro, director of London-based consultancy Spiro Sovereign Strategy, in a note to clients.
Investors are "overlooking the significant political and economic risks," he continued, pointing to the politics surrounding Italy's economic reform program and the severity of the nation's downturn.
Spain's future is looking a little brighter than it has in recent weeks, after Moody's left the troubled country's credit rating in investment-grade territory.
The decision to refrain from slapping Spain with a junk rating was based on an assumption that Madrid will tap Europe's bailout fund, the European Stability Mechanism, and reflects progress the country has made on fiscal and banking reforms, said Moody's late Tuesday.
It was also MOREHibah Yousuf - Oct 17, 2012 2:18 PM ET
The United States lost its pristine AAA credit rating a year ago Sunday, but you wouldn't know it by looking at the Treasury market.
"The telltale sign was day one: Standard and Poor's downgraded the U.S. credit rating on a Friday night, and Monday morning, U.S. Treasuries exploded," said Paul Montaquila, head of fixed-income trading at the Bank of the West. "Since then, it's been a year of relentless purchasing and MOREHibah Yousuf - Aug 5, 2012 8:20 AM ET
Investors who are on the hunt for yield may want to avert their eyes from long-term Treasuries.
The yield on the 10-year note slid to a record low of 1.44% Monday morning, as ongoing signs of weak global growth kept the flight to safety alive and well. Investors tend to snap up Treasuries during times of uncertainty because they're backed by the U.S. government.
It's not exactly a new story that the MORECatherine Tymkiw - Jul 16, 2012 11:30 AM ET
Corn prices have soared more than 40% in recent weeks as the scorching, dry heat wreaks havoc on crops in the Midwest.
Prices went as high as $7.33 per bushel of corn on the Chicago Board of Trade Monday, not far from the record high of $7.9975 hit last June, amid worries about flood damage. Prices eased slightly Tuesday, as investors await the U.S. Department of Agriculture's updated forecast for harvest yields, which is due MOREHibah Yousuf - Jul 10, 2012 11:52 AM ET
The world is hungry for U.S. debt.
Foreigners increased their holdings of long-term U.S. debt by $25.6 billion in April, up from a $21.9 billion increase in March, according to the Treasury Department's latest report on foreign holdings of U.S. debt released Friday morning.
The United Kingdom, France and the Caribbean had the biggest appetites for U.S. government-backed debt, according to the Treasury International Capital data (TIC) for April.
China, the U.S. government's MOREMaureen Farrell - Jun 15, 2012 12:06 PM ET
Italy faced its first in a series of debt auctions Wednesday and it wasn't pretty.
The government sold 6.5 billion euros of 1-year notes at an average yield of 3.97%. That's sharply higher than the 2.34% yield at last month's auction and may signal further trouble ahead.
Italy's borrowing costs have been creeping higher as investors worry the country may be headed closer to bailout territory. The yield on Italy's 10-year MORECatherine Tymkiw - Jun 13, 2012 9:47 AM ET
Spanish bond yields rose to a record high Tuesday as investors remain worried about the link between Spanish banks and the government.
The yield on 10-year Spanish bonds rose to 6.83%, marking the highest level since the euro was introduced in 1999.
"We're in uncharted territory," said Nick Stamenkovic, market strategist at RIA Capital Markets in Edinburgh.
Fitch downgraded the credit rating of 18 Spanish banks, pointing to the weak economy and the MOREBen Rooney - Jun 12, 2012 11:13 AM ET
|4 takeaways from Janet Yellen's testimony|
|Under Sanders, income and jobs would soar, economist says|
|Sears announces it's closing at least 50 stores|
|Mark Zuckerberg reacts to board member's India comments|
|China is on a massive gold buying spree|