The spread between Italy's benchmark 10-year BTP bond and its Germany counterpart traded below the psychological threshold of 100 basis points Friday morning as Italian interest rates fell to lows not seen in almost five years.
The spread between the BTP and the German Bund slipped to 98 basis points mid-morning after opening just over 100 basis points.
The yield on Italy's 10-year bond has fallen to just 1.32% - a strong sign of surging investor demand.
So narrow a spread has not been seen since May 2010.
Soon after that, amid the European debt crisis and changes in Italian governments, the spread widened to above 500 basis points with yields above 7%.
Such high levels indicated how low investor confidence had fallen during the worst periods in 2011 and 2012, and how high an interest rate the Italian government had to offer to lure investors to its paper and away from what has been considered the ultra-safe Bund.
The interest now in Italian bonds is not only an indication of rising confidence, however.
Some investors are snapping up bonds before the European Central Bank (ECB) begins its massive bond-buying quantitative easing program aimed at lowering interest rates and boosting demand.
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