Italy forced to pay record rates at bond auction

Italy has been forced to pay record interest rates in a 10bn euro ($13bn; £9bn) auction of treasury bills.

The rate of interest for the new debts due to be repaid in six months was 6.504%, compared with 3.535% in the last comparable sale on 26 October, the BBC reports.

The rate for two-year borrowing was 7.814%, up from 4.628% last time.

However, the Bank of Italy stressed demand for the bonds had been high, with demand outstripping supply by 50%.

The FTSE MIB in Milan dropped 1% following the auction, down 1.9% on the day.

The Italian government's implied cost of borrowing, based on the price at which its debts are traded on financial markets, has risen steadily over the last few weeks to levels seen as unsustainable in the long-term.