The European Central Bank's (ECB) bond purchase plan appears to play to the detriment of German debt, demand for which has noticeably wavered since the ECB announcement, while Italy placed its six-month bills at lower yields.

Germany has held another sovereign bond auction in which it failed to meet its offering target. The German Treasury issued 10-year bonds on Wednesday morning for a total of 3.19bn euros, much less than the five billion euros targeted. Bids totaled only 3.95bn euros.

Yields climbed to 1.52% compared to 1.42% in the prior comparable auction, while the bid-to-cover ratio was a very modest 1.2.

This marks the second long-dated debt auction in which Germany has been unable to match its maximum target. On September 5th, Germany issued bonds for €3.61bn compared to a target of €5.0bn on a bid-to-cover ratio of 1.1.

The Italian Treasury has tapped the sovereign debt markets on Wednesday morning for 9.0bn euros via the issuance of six-month bills. The securities maturing on March 28th, 2013 fetched a yield of 1.503%, slightly less than the 1.585% solicited by investors in the prior auction of six-month bills. Demand was also lower this time around with a bid-to-cover ratio of 1.39 compared to the prior 1.69.

Just the day before, Spain issued its own six-month bills at a higher yield than Italy, at 2.123%.

"Italian debt auctions continue to be fairly well received, helped by the ECB's conditional pledge to purchase unlimited amounts of short-dated paper. Sentiment-wise, these are still the most favourable market conditions for Italian sovereign debt since the high point of the LTRO-led rally, and possibly even since Italy was dragged into the eurozone crisis in July 2011," said Nicholas Spiro of Spiro Sovereign Strategy, The Telegraph reports.

"The jury is still very much out as to whether Italy is once again going to suffer collateral damage from developments in Spain," said Spiro, adding that Italy's biggest risk is the deepening political and economic crisis in Spain.

SC

Related share prices