LONDON: Spanish government bonds rallied on Wednesday, driving yields lower for a second consecutive day after a solid sale of short-term bills in the previous session curbed the negative sentiment surrounding the country.

Spanish 10-year yields fell 11 bps on the day to 5.79 percent, backing further away from Monday's brief break above 6 percent, as the marginal improvement in sentiment prompted investors to close out short positions ahead of a bond auction on Thursday.

Italian yields also fell, down 7 bps at 5.41 percent but the cost of insuring the country's debt rose 7 bps on the day to 432 bps.