Year end. Time to balance accounts. Yet not all accounts can be finished now, because there is still work to do in Italy, a country facing its most difficult week of the year yet given that in little more than twenty-four hours, it will attempt to raise upward of 20 billion euros by offering six classes of bonds to buyers from the financial markets.
Specifically, on Wednesday Italy is aiming to raise 9 billion through six-month notes and another 2.5 billion with two-year bonds. Thursday it will try to get 1 billion in six-year bonds and another 3 billion in three-year bonds. The grand total is 20 billion euros, a figure that equals approximately 1.2% of the Italian GDP.
A Hostile Environment
The Italian treasury will face this test in the midst of a hostile environment. Investors will once again demand nearly 6.98% for 10-year bonds. At the same time, this yield sets the Italian risk premium (determined by measuring against German 10-year bonds) at 502 basis points.
