Italy still suffering from market pressure had to sell today more bonds at record borrowing costs where it sold 7.5 billion euros of different maturity bonds shy of it 8.0 billion euros maximum target.

The Treasury sold 3.5 billion euros of three-year bonds at a record 7.89% interest surging from the last sale at an interest of 4.93% in October a clear notion of the rapid deterioration in market sentiment. They sold 1.5 billion of 2020 at an interest of 7.28% and also 2.5 billion of 2022 at 7.56% up from 6.06%.

Conditions in Italy continue to worsen with the market betting against the nation's ability to control its surging debt and also be able to maintain the finances at this record rate which is surely unsustainable. The new Mario Monti government came to take control of the situation and Monti is expected to announce the measures to tackle the staggering 1.9 trillion euros for debt as soon as next week.

The Italian bond auction comes as the euro area finance ministers head to their Brussels meeting with the crisis covering their agenda and hope that they can finalize the details of the EFSF to activate its powers to calm debt markets at least instead of leaving the crisis unattended and at the mercy of investors who clearly will not quench unless the ECB comes in full action and capacity.

We surprisingly saw good reaction in the market on the debt sale despite the record costs and the short of maximum target sale as investors saw a good buy in Italy and seemingly convinced that the risk is worth taking as Italy will not be allowed to fail which was reflected in the bid-to-cover ratio where the three-year bonds bids was 1.35 times supply and the 2022 bonds saw 1.27 times bids.