ROME — Small investors in Italy responded to a patriotic drive to buy bonds on Monday to prop up an ailing market after warnings from France and Germany that Rome's debt mountain could kill the euro.
UniCredit, the country's leading bank, hailed what it called a "very positive result" in terms of volume, with the Milan stock market announcing a record volume of some 81,000 transactions for the government bonds worth around 2.6 billion euros ($3.5 billion).
The response was a "sign of the confidence that many clients have in the country and its future," the bank said.
Italian banks waived their fees on bond purchases for a day in a special initiative on the secondary market, where borrowing costs have surged amid international concern over Italy's 1.9 trillion euro ($2.5 trillion) debt.
Long-term borrowing costs have shot up as high as 8.0 percent -- levels widely considered unsustainable for the longer term.
"The volumes of bonds on the secondary market doubled today compared to the average over the past few weeks," UniCredit said.
"The amounts have been medium or small, attributable to families and private citizens, a sign of confidence from many of our clients," it added.
Separately, the Treasury on Monday said it raised at auction 567 million euros in bonds indexed to eurozone inflation due in 2023, but the rate jumped to 7.3 percent from a previous sale at 4.6 percent while the amount was less than expected.
Leading business people, students and even footballers declared they were taking part in Monday's initiative entitled "BTP Day" ("Bond Day").
"I was expecting a lot of movement but until now there's been little demand as far as I know," said Francesco Montuori, the manager in central Rome of a branch of Intesa Sanpaolo, Italy's largest retail bank.
The Italian Banking Association (ABI) admitted the initiative was "symbolic" but said the drive could be important as a show of "Italians' confidence in their own country ... (and) to improve the judgement of global markets."
And there were signs the idea had attracted some of the country's savers.
Italy's third largest trading company, Hi-Mtf, announced a marked increase in small-time investor interest, clocking up 9,000 transactions worth 241 million euros, compared with their usual rate of 1,000 deals a day.
"They are small or tiny orders, in the few thousand euros mark, which shows it is savers who are buying," said Gianbattista Roversi from Hi-Mtf.
"Italians in difficult times know how to react," he said.
Azimut asset management in Milan meanwhile launched a "Solidity" fund, with 50 percent off commissions, as "a sign of their faith in the Italian system."
Patriotic bond buyers in Bologna even organised a group hug to celebrate their part in the struggle to save Italy from financial catastrophe.
Financial blogger Paolo Barrai, however, bought advertising space in Libero newspaper to warn Italians about taking part.
"At the moment it's risky for a normal Italian family to buy bonds. This has to be clear because if they need to sell before the due date there is a danger of losing money," he said in the advert.
Calling the drive "pure populism," he added: "Confronted with this uncertainty, an act of pride by the banks could have been to move BTP Day by a dozen days after Monti adopts the necessary (economic reform) measures."
Prime Minister Mario Monti's cabinet is expected to launch a raft of measures including a possible increase in sales tax, a reform of pensions and a tax on property, at a cabinet meeting next Monday.
Rome needs to refinance about 400 billion euros in debt next year, and investors fear interest rates may rise until they are unsustainable.
"Italy is not at risk of default," said Giuseppe Mussari, head of ABI, though he urged Monti to speed up his reforms and to keep to the promised deadlines for implementing the measures.
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