Italy’s treasury bond yields hit record

Investor nervousness meant the Italian treasury had to offer higher interest to sell its treasury bonds on Monday.

The spread between its 10-year bonds and Germany’s – which are considered the safest in Europe – hit a new record, its highest since the creation of the euro.

It also had to pay much higher rates to raise fresh short term funds.

Rome issued eight billion euros in six-month bonds and 2.5 billion euros of bonds due in 2013 and had to pay a yield – or rate of return for investors – of that was sharply higher than its last such sale.

That comes after the ratings agency Moody’s Investors Service warned that it may downgrade Italy, a move that was followed by a similar creditworthiness warning on a number of Italian banks.

Last week Moody’s put the long-term debt and deposit ratings of 16 Italian banks and the long-term issuer ratings of two Italian government-related financial institutions on review for possible downgrade.

On June 17 it placed Italy’s Aa2 sovereign bond rating on review. Standard & Poor’s has done the same.

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