Italy's government bond auction sees strong demand, with rising mid- and long-term interest rates reflecting policy expectations

⑴ The Italian Ministry of Finance completed a new round of government bond auctions on Friday. €2.5 billion of BTP bonds maturing in June 2031 were issued, with total bids of approximately €4.3 billion and a bid-to-cover ratio of about 1.7. The gross yield was around 3.44%, rising by about 6 basis points from the previous auction. ⑵ €4 billion of BTP bonds maturing in October 2036 were issued, with a bid-to-cover ratio of about 1.6. The gross yield was around 4.10%, rising significantly by about 10 basis points compared to the previous auction, with a more notable increase at the long end of the curve. ⑶ €1 billion of CCTEU bonds maturing in April 2034 were issued, with a bid-to-cover ratio of about 2.0. The gross yield stood at approximately 3.14%, the highest subscription ratio among all categories, indicating a relatively stronger market preference for floating-rate instruments. ⑷ €1 billion of CCTEU bonds maturing in April 2035 were issued simultaneously, also with a bid-to-cover ratio of about 2.0 and a gross yield of approximately 3.20%, further confirming investors' willingness to allocate capital to inflation-linked or floating-rate products. ⑸ Overall, this auction saw all bond maturities well-covered, with short- and medium-term categories attracting more aggressive bidding. The sharp rise in long-end yields reflects continued market pricing for persistently high rates and expanding fiscal deficits, with further widening pressure remaining between Italian and German bond spreads.