The Italian Treasury has raised a total of 6.5bn euros (the top-end of its 4.25-6.5bn euro target) with the issuance of bonds maturing in 2015, 2017, and 2026. Borrowing costs have gone down again for Italy.

The outcomes for the three auctions were:

2015-maturity bonds: €4bn were issued for a an average yield of 2.75%, compared to 4.65% in July and the lowest since October 2010; the bid-to-cover ratio was 1.49.

2017-maturity bonds: €1bn were issued for a an average yield of 3.71%; bid-to-cover ratio of 1.85.

2026-maturity bonds: €1.5bn were issued for a an average yield of 5.32%, compared to the previous 5.9%.

"It really does go to show how much optimisim there is on the back of the Outright Monetary Transactions, on the back of the Constitutional Court decision and eminently partly also fuelled by hopes for QE3 tonight," Monument Securities strategist Marc Ostwald was quoted saying on The Guardian.

Nicholas Spiro of Spiro Strategy also noted the 'dramatic' improvement in sentiment towards the periphory but warned the markets should not fall into the illusion that Italy is out of danger. "The depth of the recession, the scant prospect for meaningful growth, the size of the country's refinancing requirements and, crucially, the increasingly uncertain political outlook all pose significant risks going forward," he said.

MG

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