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MILAN, July 26 (Reuters) - Italy's two-year borrowing costs fell on Friday to their lowest since May as hefty debt redemptions next week supported demand.
The treasury placed the top planned amount in the sale and drew healthy demand for its two-year bonds. It did not offer the usual inflation-linked BTPei bonds, saying it had ample cash.
"Next week almost 35 billion euros of Italian debt will come due," said a Milan trader.
The treasury sold 3 billion euros ($4 billion) of zero-coupon bonds maturing on June 30, 2015, paying a yield of 1.86 percent. That was the lowest since May - before the U.S. Federal Reserve's signal that it would begin to withdraw its massive monetary stimulus prompted a sharp sell-off in global markets.
At a similar auction one month ago, the treasury had to pay a yield of 2.40 percent to lure investors who were fretting about an end to the Fed's money-printing.
Demand on Friday was 1.56 times the offer, up from a bid-to-cover of 1.48 one month ago.
Rome will return to market on Monday to offer 8.5 billion euros of bills. On Tuesday it will put on the table up to 6.7 billion euros of five- and 10-year bonds.