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"The cost of funding will become a crucial factor in the first quarter of 2012, when Italy has to issue 62.5 billion euros of bonds"
- Michael Leister, rate strategist at WestLB
Italy's five-year borrowing costs rose to record in a bond auction on Wednesday, adding pressure on Italian government to take decisive action against the crisis after last week's summit failed to restore investor confidence. Five-year debt was trading 6.81% at the end of the trading session.
"Uncertainties on the future of the debt crisis remain high and the market seems to be mainly driven by flight-to-quality this morning," said Annalisa Piazza, a market economist at Newedge Strategy.
"The cost of funding will become a crucial factor in the first quarter of 2012, when Italy has to issue 62.5 billion euros of bonds," said Michael Leister, rate strategist at WestLB. "For now however, the market is happy with supply being digested."