Italy's recent request that China buy its debt did not keep a lid Tuesday on how much Europe's third-largest economy has to pay to convince lenders it is a trustworthy borrower.
A report in the Financial Times on Monday forced Italian leaders to acknowledge contact in recent weeks between Beijing and Rome over the European nation's surging interest rates.
But the possibility that China might step in with big bond purchases and thus help lower the amount Italy must offer lenders to sell its increasingly suspect government bonds appeared to evaporate Tuesday.
Rome sold a new five-year bond but it carried an average yield that was more than 10 percent higher than a recent sale of a similar bond. Further, the demand for the government bonds was lower than the last time Rome offered similar bonds.
In addition, on Monday Italian credit default swaps, an insurance-like instrument designed to protect lenders against default, jumped to a record spread of more than 5 percent.
Although Monday's report that Italy and China were discussing big bond purchases sparked fresh hope among some observers, by Tuesday reality had set in.
The issue with Europe is bigger than China alone can help with, Ju Wang, a fixed-income strategist at Barclays Capital in Singapore, told Bloomberg, adding that Italy's debt load alone is a sum exceeding half the Chinese foreign-exchange reserves.
China probably will continue to help to shore up the euro, but its involvement in direct purchases of troubled Europe debt is unlikely to be too aggressive.
China's reason for such intervention as it actually engages in stems from its status as the world's largest exporter.
It's a clear pattern of China's intention to help stabilize the euro area, Nicholas Zhu, head of macro- commodity research for Asia at Australia & New Zealand Banking Group in Shanghai and a former World Bank economist, told Bloomberg. The benefit to China is that it will help in the perception of host countries if China is viewed as a responsible stakeholder in the global community.
The continuing euro zone troubles helped lift gold in U.S. futures trading and U.S. stocks.