No party won a parliamentary majority in the weekend vote, rattling investors in the eurozone’s third-largest economy and rekindling concerns over the region’s debt problems. Although the Treasury sold the maximum planned amount of €4bn of the new 10-year bond, the yield it had to offer rose to 4.83%, the highest since October. Yields in the secondary market were, however, a little easier than on Tuesday.
There were signs that foreign investors had stayed away from the auction, concerned at the political uncertainty, leaving Italian institutions to buy up most of the paper.
"Demand for both lines was relatively solid, probably led by domestic accounts who took advantage of higher yields," wrote Newedge strategist Annalisa Piazza. "We rule out (that) foreign accounts have played a major role at today’s auction as political risks remain high."
The results, notably the dramatic surge of the antiestablishment 5-Star Movement of Beppe Grillo, left the centre-left bloc with a majority in the lower house but without the numbers to control the upper chamber.
Pier Luigi Bersani, head of the centre-left Democratic Party, has the difficult task of trying to agree on a "grand coalition" with conservative former prime minister Silvio Berlusconi, the man he blames for ruining Italy, or striking a deal with Mr Grillo, a completely unknown quantity in conventional politics. The alternative is new polls, although Mr Berlusconi and Mr Bersani have indicated that they want to avoid that.
Standard & Poor’s said that the election would not immediately affect the country’s rating.