Italy's 10-year government bonds rose, pushing the yield down from the highest level in two weeks, amid speculation demand will increase as the nation sells as much as €7 billion of securities today.

Italy's five-year notes advanced for the first time since October 22 before an auction of as much as €4 billion of new 3.5 per cent debt due in 2017, and €3 billion of securities maturing in 10 years.

Spanish bonds rose as the nation's recession deepened in the third quarter, fuelling bets the country will ask for an international bailout.

German bunds fell as a report showed unemployment increased.

Italy's bond sales are "going to be an important event, particularly because of the new five-year note on sale," said Luca Cazzulani, a senior fixed-income strategist at UniCredit in Milan.

“There should be strong demand. In terms of the cost of funding the 10-year is likely to print a lower number than the last auction.”

Italy's 10-year bond yields fell one basis point, or 0.01 percentage point, to 5.01 per cent at 9.48 am London time, snapping three days of increases.

The 5.5 per cent security due November 2022 gained 0.075, or 75 cents per 1,000-euro face amount, to 104.335.

The rate climbed to 5.02 per cent yesterday, the most since October 12.

Five-year note yields dropped three basis points to 3.87 per cent.

Bloomberg