Spread closes on 225
Still lowest since July 201127 December, 19:31
A narrower spread indicates greater investor confidence in the Italian economy and Rome's ability to pay down its huge debt.
Analysts said investors were responding to a good bond sale and the prospect of political stability as Italy's left-right government embarks on reforms in the New Year, although pointers were seen as weak in thin post-holiday trading.
Markets posted the latest in a two-week series of gains across Europe as the Dow Jones hit new heights amid optimism that the US economy is strong enough to withstand the gradual withdrawal of monetary stimulus.
The Milan bourse closed 1.39% up despite some turbulence around banking stocks, notably troubled Tuscan lender Monte dei Paschi di Siena (MPS) which postponed a key meeting.
London was 0.85% up, Frankfurt 1.06% up, Paris 1.40%, Madrid 0.82% and Athens 4.78% up.