Italy's government bond yields hit record high

image captionThe successful bond sale will be welcome news for Italian Finance Minister Giulio Tremonti

Italy has successfully sold its latest issue of government bonds, but it had to offer the highest returns on record to ensure they were all purchased.

The new 15-year bonds offer a yield of 5.9%, an all-time high for Italian bonds of that duration.

Five-year bonds were also released, with a yield of 4.9%, the biggest since June 2008. Demand for these was double the release.

The sale raised a total of 2.97bn euros ($4.2bn; £2.6bn).

Financial analysis group Forex said the share sale would do little to boost confidence in Italy's finances.

"While the auction will most likely be spun as a success, there are some worrying signs and Italy won't be able to continue to have debt auctions like this indefinitely," it said.

In addition to the all-time high yield, Forex highlighted the fact that the markets had expected the Italian government sell more bonds than it did in Thursday's issue.

It added: "There were rumours that Bank of Italy officials had staged a charm offensive to major banks and financial institutions to ensure they participated in the auction."

The bond sale came before the Italian Senate passed a tough austerity budget, which proposes cuts of 48bn euros over three years.

The lower house of the Italian parliament, the Chamber of Deputies, is now expected to also back the budget when it votes on it on Friday.

Italy wants to reduce one of the largest budget deficits in the eurozone and avoid any need for a European Union led bail-out.

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