Italian borrowing costs fell at the final bond auction of the year on Thursday in a sign of resilient investor appetite for the country's debt as the government prepares to rescue ailing bank Monte dei Paschi di Siena and other weak lenders.
Italy sold 6.75 billion euros ($7 billion) of debt over four bonds, at the top of its planned range for the issue.
Borrowing costs had risen sharply at the last auction in late November as investors fretted about looming political instability in the wake of a December 4 referendum on constitutional reform. Prime Minister Matteo Renzi resigned after the vote.
Concerns have receded as the transition towards the new government led by Renzi's loyalist Paolo Gentiloni has been relatively quick and smooth. Gentiloni has also announced measures to bolster the country's vulnerable banking sector, including a 20 billion euro state fund, addressing another source of investors' worry.
But doubts remain over whether the banking fund will be sufficient and over the exposure to bad loans of Italian banks, which hold a high proportion of government debt.