Italian government bond yields fell on Thursday after European Union budget hawk Austria said it was willing to compromise to reach a deal on the bloc's response to the coronavirus crisis. However, euro bonds remain out of the question, Finance Minister Gernot Bluemel said on Thursday.

Earlier, Italian two-year BTP yields rose to a three-week high as investors waited to see whether European finance ministers would be able to agree on an economic rescue package.

Yields across core euro zone bond markets were down by 3 to 6 basis points.

The Italian 2-year government bond yield was last down 3 bps at 0.66%, having earlier risen more than 12 bps to 0.813%, its highest since March 19. It remained way below the level it skyrocketed to on March 17 when it rose above 1.5%.

The 10-year Italian yield was down 5 bps at 1.601%, with its German and Dutch equivalents down 4 bps at -0.35% and -0.076% respectively. In France and Belgium 10-year yields fell by 5 and 6 bps.

Italian debt was also supported by comments by Federal Reserve Chairman Jerome Powell in the afternoon session.