Markets Shrug at Long-Term Italian Debt Auction: What Investors Need to Know

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What's happening in the headlines can affect you as an investor. Here's what's going on, what you need to know, and what you can expect next.

The headline
Financial Times is reporting that, despite an overall successful sale of long-term Italian debt, the markets have failed to ignite.

The details
Rome sold $3.2 billion worth of 2014 bonds at a yield of 5.62% today, down from 7.89% at the previous sale on Nov. 29, and priced $3.2 billion of 2022 bonds to yield 6.98%, compared with 7.56% on Nov. 29.

The government also sold $2.6 billion worth of bonds due in 2021 and a floating-rate security due in 2018. The auction of both the 2014 and 2021 maturity notes, however, fell short of the Treasury's target.

Now what?
Coming just weeks after the most recent eurozone summit and the launch of the European Central Bank's emergency three-year loan program, and after a successful sale of short-term Italian debt yesterday, this follow-up sale of long-term debt was seen as another important test of market sentiment.

But markets have largely shrugged it off. The Italian FTSE MIB index was flat by 11 a.m. in London, while the German, French, and U.K. benchmark stock indexes were slightly higher on the day. The Dow (INDEX: ^DJI) , the S&P (INDEX: ^GSPC) , and the Nasdaq (INDEX: ^IXIC) have inched up as well, after taking some losses yesterday.

Why the lack of interest? Maybe it's because the 2014 and 2021 notes fell short of target. Maybe it's because it's the holiday season, a traditionally slower time in the markets. Or maybe the markets aren't quite convinced that the eurozone's problems have been resolved, which they would be very right in thinking. The financial crisis, now being expressed through the lens of distressed European sovereign debt, isn't over yet, and everyone knows it.

As always, Fools, don't have money in the market you're going to need over the next three to five years, keep an eye on the fundamentals of the companies you're invested in, and stay calm. Like us, you're in it for the long term.

Keep track of what's happening with the indexes mentioned here by adding them to My Watchlist, a free service of The Motley Fool that lets you easily keep up with everything on your investing radar.

At the time this article was published Fool contributorJohn Grgurichloves his Twitter news feed so much he wants to marry it, but he owns no shares of any of the companies mentioned above. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has a scintillatingdisclosure policy.

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