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Italy keeps debt costs in control

MILAN: Italy's debt costs rose only slightly at its last auction of long-term debt in 2012, drawing a solid response from investors yet to be unnerved by the risks surrounding February elections and the exit of its trusted technocrat government.

The treasury sold three billion euros ($3.9bn) of its 10-year bond paying a yield of 4.48 per cent, up from 4.45pc at a similar sale one month ago.

It also placed 2.87bn euros of five-year bonds paying 3.26pc, up from 3.23pc at end-November sale.

In very thin market conditions Rome was able to find decent demand for its bonds among investors searching for high returns, reflecting the easing of at least some concerns in the euro zone's debt crisis since August.

"It seems that the result was better than expected, with the yield on the 10-year lower than in the secondary market," said Emile Cardon, market economist at Rabobank in Utrecht.

Markets are starting to focus on an uncertain Italian election campaign as the country approaches elections scheduled on February 24 and 25.

Investors, however, seem to be willingly to buy Italian debt while waiting for more clarity on domestic politics.

"The biggest fear for the market is that political turmoil in Italy will return. But this outcome shows (investors) still have confidence that Italy will do the right thing and I think this has something to do with the comeback of (outgoing Prime Minister Mario) Monti."



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