Italian three-year borrowing costs fell to the lowest in nearly two years on Friday (January 11) dipping under 2 percent at an auction amid strong demand for the debt of weaker euro zone members from investors hunting for higher yields.

Investors snapped up 3.5 billion euros of a three-year BTP bond maturing on December 2015, securing a return of 1.85 percent.

The treasury paid 2.5 percent on the same bond at a similar sale one month ago.

The successful auction shows investors appear to have little concern for Italy's electoral campaign ahead of a crucial general election in late February.