Italian bonds halted a two-day drop and the nation sold €6.8 billion of debt, a sign of investor confidence that fallout from Greece’s financial crisis can be contained.

Italy’s sale included €2.9 billion of 10-year bonds and €1.5 billionof five-year securities. While the bid-to- cover ratio, a gauge of investor demand, was the lowest since December for the longer-maturity bonds, it increased for the shorter-dated notes.

While Greece’s international bailout is set to expire at midnight, raising the risk of an exit from the euro, moves in bond markets have been tempered. A drop in Italian bonds on Monday was only the deepest since May, amid faith that the European Central Bank’s bond-buying plan and euro-area firewalls would hold down yields, even as the turmoil in Greece escalated.

“Risk appetite held up well for most of yesterday,” Peter Chatwell, a rates strategist at Mizuho International in London, said in an e-mailed note. “We were expecting to see knee-jerk crisis trades getting put on given that a Greek referendum represents a material rise in tail risk, but the market was calm. Outright longs of the liquid parts of Italian and Spanish curves still look attractive at the current time.”

A long position is a bet an asset’s price will rise. Italian 10-year bond yields fell two basis points, or 0.02 percentage point, to 2.37 per cent at 10:40 a.m. London time. The price of the 1.5 per cent security due in June 2025 advanced 0.19, or €1.90 per 1,000-euro face amount, to 92.475. The yield rose rose 24 basis points on Monday, the biggest increase since May 5th. That was less than half an initial jump of 57 basis points at the market’s open, when yields reached 2.72 per cent, the highest level since October.

Bloomberg