MILAN: Italian six-month borrowing costs fell further towards 1 percent on Wednesday, marking their lowest level since September 2010, as a bill auction drew good demand ahead of a sale of longer-term debt on Thursday.

The average yield on Italian six-month Treasury bills fell to 1.119 percent from 1.202 percent at the end of February.

The 8.5 billion euro sale was covered 1.5 times, up from 1.36 times.

On Tuesday Spain paid 0.84 percent to sell six-month debt as auction yields on this maturity edged up slightly from 0.76 percent at a previous sale.

Also on Tuesday Italy sold zero-coupon and inflation-linked bonds. The auction saw decent demand and a sharp fall in two-year yields from a month earlier, but supply pressure on the linker segment drove Italian yields higher in the session.

Italy will tap the markets again on Thursday offering up to 8.25 billion euros of bonds, including five and 10-year debt.