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Italian short-term treasury bill yields dip

Euro coinage
Image caption Greece and Portugal are now only issuing short-term bills

Italy has successfully sold 12bn euros (£10bn) of short-term treasury bills, at a lower price than in a similar auction in January.

Investors paid interest rates, known as yields, of 2.23% for one-year bills, down from 2.735% in January, showing markets see Italy as less of a risk.

Germany also sold 4.53bn euros of six-month bills, at a yield of 0.0761%.

Last month, German bills sold for negative interest rates as investors sought a safe haven.

The higher the yield, which is the return paid to investors for lending the money, the greater the concern about the country's ability to repay.

"Today's eurozone Treasury bill auctions provided something of a litmus test for investor sentiment in the immediate wake of the agreement on the Greek bailout package," said Don Smith, chief European economist at interdealer broker iCap.

"Although the bill auctions were conducted without any hiccups, the level of demand was discernibly lower, tacitly highlighting ongoing investor nervousness about the eurozone sovereign debt crisis."

Sanjay Joshi, senior portfolio manager at London & Capital said: "On the surface [these are] relatively positive bill auctions with Italy's cost of capital falling, which will be viewed as encouraging by European policymakers.

"However, the German 6-month bills yield is just above zero, which continues to highlight the inherent dangers still present in the euro area, with investors still willing to lend at historic low rates," added Mr Joshi.

Treasury bill sales usually involve rolling over a country's existing debt for a short period of time.

After the eurozone debt crisis began and rates on eurozone bonds began to soar, Greece and Portugal stopped issuing longer-term debt as yields spiked and now only issue short-term bills.

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