Italy rates rise in 10-year bond sale

Italy's borrowing costs edged up at an auction of medium and long-term bonds on Thursday, but rose less than expected, following an easing in investor fears over the Federal Reserve's plans to wind down its stimulus programme.

The Italian Treasury raised 2.5 billion euros ($3.25 billion) in bonds due to expire in 2018 at a rate of 3.47 percent, compared to 3.01 percent at the end of May.

It also raised 2.5 billion euros in ten-year paper set to mature in 2023 at a rate of 4.55 percent, compared to 4.14 percent at a similar operation on May 30.

Analysts at Italy's UniCredit bank had forecast interest rates would rocket up after the country performed badly in two bond sales on Tuesday and Wednesday this week.

The rise in rates suggested increased investor concern over Italy's political stability following the conviction Monday of former premier Silvio Berlusconi for paying an underage prostitute for sex.

Berlusconi's People of Freedom (PDL) party is a key member of the ruling coalition and the conviction raised tensions within the already uneasy centre-right and left alliance.

ahe/ide/rl