Italy’s borrowing costs surged to 8 percent in its latest auction of three year bonds. Most analysts would see that as an unsustainable level over a long time, driving the country’s debt burden out of control. Greece, Ireland and Portugal were forced to seek bailouts from the EU and IMF when their bond yields rose about 7 percent. Only a month ago, Italy had paid just under 5 percent to sell three-year paper.
The bonds did however sell in the volumes targeted by the government, an outcome that pushed Europe markets upwards. However, the indications are that investors feel Italy and the eurozone’s sovereign debt problems are reaching make or break point.
The Italian auction is the latest in a series of European bond sales being closely watched for signs of contagion.