Italy's borrowing costs dip despite Moody's downgrade

Feb 14, 2012, 11:48 GMT

Rome - Investors appeared on Tuesday to shrug off ratings agency Moody's downgrade of Italy's debt by buying up Italian government bonds whose yields went down compared to last month.

In an auction, Italy's treasury sold 4 billion euros (5.3 billion dollars) of three-year bonds with yields of 3.41 per cent, down from the 4.83 per cent registered in an similar sale on January 13.

The treasury said demand for the bonds was almost one-and-half times higher than supply.

Moody's Investors Service on Monday cut the debt ratings of six European countries including Italy, which was downgraded to A3 from A2 with a 'negative' outlook.

As with similar downgrades last month by two other US-based ratings agencies, Fitch and Standard & Poor's, Italian Prime Minister Mario Monti's government did not immediately react to the move.

Monti, during a visit to the United States last week, said his non-elected technocratic government which took office in November would press on with austerity and growth-boosting measures aimed at tackling Italy's debt problems.

In another sign that market concern over Italy's ability to stave off a debt default was easing, the premium investors demand to hold Italian bonds instead of the benchmark German debt on Tuesday fell to 360 points from 377 points.

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