Demand drives Italian borrowing costs lower Italy enjoyed strong demand at bond auctions on Tuesday as yields fell to the lowest levels since last summer. Analysts said the European Central Bank's emergency liquidity provisions had continued to support the Italian bond market as Rome sold €3.75bn in 10-year bonds at a yield of 5.5 per cent, down from 6.08 per cent in January, and the lowest since August 2011. The country also sold €2.5bn in five-year notes at 4.19 per cent, down from 5.39 per cent in January, the lowest since May 2011. The bid-to-cover ratio was 1.4 times for the 10-year bonds and 1.42 times for the five-year bonds as the sale totalled €6.25bn - the upper limit of the indicative range of between €5bn and €6.25bn. Richard McGuire, fixed-income strategist at Rabobank, said: "Italy's auctions this morning were positive with the upper end of the range issued and cover reasonable on both issues. The ECB's LTRO has evidently provided keen support for front end Italian paper although positively, as today's results show, this has not been to the detriment of longer issues. Tuesday's sale was the second sovereign issue for Italy in as many days after Monday's successful auction of more than €12bn in short-term bills. Italy's cost of borrowing has fallen sharply since the end of last year when yields on the country's 10-year bonds were hovering at about 7 per cent, a level that is broadly thought of as unsustainable. On Tuesday, the yield on existing 10-year bonds were down 6.6 basis points at 5.37 per cent, according to Reuters data.