Italian 10-year borrowing costs climbed to 5.84 per cent at a key auction today, 60 basis points above a comparable bond sale in March, after a ratings downgrade of Spain added to markets concerns.

Italy sold €5.95 billion of bonds, near the top of a planned issue range of between €3.75 billion and €6.25 billion.

Analysts said the Treasury had widened the range size and lowered its bottom end to hedge against risks of weak demand at the sale in the face of highly volatile euro zone bond markets.

Italy offered new tranches of its May 2017 and September 2022 bonds. It also sold two lines maturing in April 2016 and February 2019 which it no longer issues on a regular basis.

In March, when it last placed the September 2022 10-year bond, it paid 5.24 per cent. Friday's sale was covered 1.48 times, slightly down from 1.65 times a month ago.

The auction yield on the May 2017 five-year bond rose today to 4.86 per cent from 4.18 percent in March. The bid-to-cover fell to 1.34 times from 1.65.

Five- and 10-year auction yields are now at their highest since January. Italian bond yields have erased a fall recorded in February and March thanks to cheap ECB funds.

Italy also sold around €1 billion of the two-off-run bonds, drawing bids for around 2.5 times that amount.

Reuters