Italy's six-month borrowing costs have fallen to a fresh euro lifetime low of 0.455 per cent as expectations of further monetary easing by the European Central Bank continues to fuel demand for short-term euro zone debt.

Italy sold the planned €8.5 billion in six-month bills at the auction, drawing demand for more than 1.4 times that amount. A same-maturity auction a month ago was covered 1.5 times and fetched an average 0.59 per cent yield.

The Treasury faces a bigger test later this week when it offers up to €9 billion in bonds, including a new 10-year benchmark.

Analysts expect the sale to benefit from continued investor appetite for higher yields offered by weaker euro zone issuers.

The market also views positively pledges by Italy's new prime minister Matteo Renzi to act swiftly on economic reforms, analysts said.

In an interview on Italian state television last night, Mr Renzi said that government plans to increase taxation on financial investments to fund lower labour taxes should not affect government bonds.

Reuters