The Italian/German 10-year government bond yield spread  tightened to 480 basis points versus 498 bps at Wednesday's settlement close.

Equivalent French and Spanish spreads also tightened, with traders citing the sharp rise in core German yields as the major driver of the move, adding that the recent selloff in peripheral debt had slowed in line with better performance from equity markets.

Mounting concerns over the impact on Germany's finances of the steps needed to tackle the euro zone debt crisis hit demand at a 10-year Bund auction on Wednesday.