Italy sold €6 billion of bonds, meeting its target, as borrowing costs fell to the lowest since March even after the nation was downgraded by Moody's.

The Treasury sold €4 billion of benchmark securities due in November 2014 to yield 3.41 per cent, down from 4.83 per cent at the last auction of similar-maturity bonds on January 13th. The treasury also sold a total €2 billion of bonds due in 2015 and 2017 to yield 3.77 per cent and 4.26 per cent respectively.

Investors bid for 1.40 times the amount offered for the 2014 bonds, up from 1.22 times in January. Italy, which needs to sell about €450 billion of debt this year, auctioned €12 billion in bills yesterday as rates fell to the lowest since
June.

Borrowing costs dropped again today even after Moody's lowered Italy's rating overnight to A3 from A2, citing a weak outlook and possible funding shocks for sovereigns and banks. Five other European nations were also
downgraded.

Italian bond yields have fallen as the European Central Bank offered banks unlimited three-year loans, propping up demand for government securities. The Frankfurt-based ECB has also been purchasing Italian bonds since August.

This week's auctions may help ease further investor concern about the country's ability to finance Europe's second-biggest debt burden. Italian bonds gained today, with the 10-year yield falling one basis point after the sale to 5.59 per cent this morning.

The extra yield investors demand to hold the securities instead of benchmark German debt fell three basis points to 3.64 percentage points.