Italy borrowing costs fall at EUR 5.48bn bond auction

(MILAN) - Italy's borrowing costs on five- and 10-year bonds fell on Monday in a sale that raised 5.48 billion euros ($6.72 billion), reflecting greater market confidence as EU leaders pledge to save the euro.

The rate on the five-year bonds was 5.29 percent compared to 5.84 percent last month while the closely watched 10-year bonds sold at 5.96 percent, falling below the key 6.0-percent threshold from 6.19 percent in June.

Total demand from investors was 7.6 billion euros, the Bank of Italy said.

Italy's stock exchange cheered the result of the auction with the main index up 2.77 percent.

Investor nerves have calmed down in recent days amid hopes of an imminent deal by the European Central Bank and eurozone member states to help lower Italian and Spanish borrowing costs by intervening on the bond markets.

ECB chief Mario Draghi reassured the markets on Thursday saying he would do everything to save the euro -- a pledge then reiterated by French President Francois Hollande, German Chancellor Angela Merkel and Italian Prime Minister Mario Monti over the weekend.

Eurogroup chief Jean-Claude Juncker on Sunday said the eurozone was ready to act together with the ECB and to involve the European Financial Stability Facility (EFSF), the bloc's current rescue fund.