Italy's borrowing costs fall in EUR 10 bn bond sale

(MILAN) - Italy's borrowing costs fell sharply on Friday in a 10-billion-euro ($13 billion) bond issue, despite renewed tensions in the eurozone on uncertainty in Greece, the Bank of Italy said.

The Treasury sold seven billion euros in one-year bonds at a rate of 2.34 percent compared to 2.84 percent in a similar operation last month. It also sold three billion euros in three-month bonds at a rate of 0.865 percent against 1.249 percent before.

Total investor demand for the bonds was at 20 billion euros.

Cyril Regnat, a bond strategist at French investment bank Natixis, said that Italian debt was becoming something of a safe haven investment among crisis-hit eurozone states.

"The two losers on the market are Greece and Spain," he said, adding that "Italy has held up well despite a pretty unfavourable context."

"The market is making an ever clearer distinction between Italy and Spain. It's not stupid and it's expecting more disappointment from Spain," he said.

"It's good news for Italy, which had been hit by contagion fears."

Following a decline in investor concern and a lowering of its borrowing costs at the start of the year, Italy had seen a return of tensions last month.

The rates seen on Friday, however, remained far higher than in March.