Friday's auction for Italian 10 year Treasuries indicated that investors are cautious about Italy's financial situation. The yield on the notes exceeded 6%. That represents a 3.78% risk premium over German 10 year notes. This will make it difficult for Italy to service its debt as bonds with lower interest rates mature.
The European Central Bank is prepared to purchase Italian debt to keep interest rates from rising and the Italian Treasury is looking for ways to sell its debt to wealthy Italians directly. Italy has one of the largest pools of wealthy individuals in Europe. International investors are primarily concerned about the ability of the weak Italian government to implement plans to reduce its debt burden and to grow its economy.
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