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Italian debt 'at a four-month high'

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Italian debt 'at a four-month high'

Italy's borrowing costs stood at their highest level in four months on Wednesday (February 27th).

The development came at the first bond auction since this week's inconclusive election results, news agency Reuters reports.

Despite this, strong demand from domestic investors - rather than those seeking international money transfer - went some way to easing concerns that the results of the election could lead to a significant destabilising of Europe's second-biggest sovereign debt market.

Undoubtedly this would have come as something of a relief after the extreme volatility that had been experienced immediately after an election in which none of the major parties won enough seats to govern.

Indeed, European economist at asset management firm Schroders Azad Zangana recently warned that the Italian election results are a strong indicator that market volatility is on its way back into the eurozone.

However, the expert did note that the country remains in a much more favourable position than it did back in November 2011 when Mario Monti took over from Silvio Berlusconi.

There were some signs that in the wake of the election, foreign investors have been steering clear of Italian currency as a result of the political uncertainty.

Annalisa Piazza, a strategist for brokerage firm Newedge, said: "Demand for both lines was relatively solid, probably led by domestic accounts which took advantage of higher yields."

"It's clear that foreign accounts played no major role at today's auction as the political risk remains high," he commented.

Indeed, Rome's ten-year yields in the secondary market fell by seven basis points to 4.83 per cent, after having reached almost five per cent in the morning ahead of the sale.

Elisabeth Afseth, a rate strategist at Investec, said that yields are higher than they have been in a very long time.

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