Italy forced to pay higher rates in bond issue: report

MILAN, July 28, 2011 (AFP) - Italy was forced to pay sharply higher rates in an eight-billion-euro ($11.5 billion) bond issue as the eurozone's third biggest economy comes under fire from investors, the Bank of Italy said on Thursday.

The Treasury issued 3.5 billion euros in bonds due in 2014, 2.696 billion euros in bonds due in 2021 as well as 840 million euros in Treasury bills indexed to the Euribor rate due in 2015 and 930 million euros due in 2018.

Italy had expected to raise between 5.5 billion and 8.5 billion euros.

The rate of return demanded by investors on the bonds due in 2014 jumped to 4.80 percent from 3.68 percent for the last similar operation. For bonds due in 2021, the rate rose to 5.77 percent from 4.94 percent previously.

Investors are concerned that the Italian economy, suffering from high public debt, low growth and growing infighting in the government, could follow Greece, Ireland and Portugal into a debt spiral that has thrown the eurozone into crisis.

Tensions on the Italian bond market went down after a second bailout for Greece was agreed at a summit in Brussels last week but have been up again this week due to concern over the details of the Greek rescue plan and US debt fears.

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