On Wednesday, the five-year borrowing costs of Italy are expected to rise further above 6 percent to mark a new euro lifetime high. This would be at an auction that will provide a first test of bond market sentiment towards the euro zone after EU summit that took place last week.
The yield on the five-year BTP bond Italy will sell on Wednesday topped 7 percent on Monday. Italy paid 6.3 percent in November to sell five-year bonds, which was its highest cost of borrowing since the single currency’s adoption in 1999.
“ECB buying in the secondary market will help, but, if the crisis worsens, it is difficult to see how Italy will retain independent market access in 2012 and help from the International Monetary Fund may at some stage be needed,” Citi analysts said.
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