Spread closes 13 points down
Yield below 4% for first time since May02 January, 19:16
The yield was 3.96%, down from 4.08% Tuesday.
It was the first time the 10-year bond rate had fallen below 4% since May. 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 holiday trading.
European markets posted mostly moderate losses after a recent string of gains on optimism that the US economy is strong enough to withstand the gradual withdrawal of monetary stimulus.
The Milan bourse closed 0.20% down despite a 16% surge by Fiat after completing its takeover of Chrysler.
London was 0.46% down, Frankfurt 1.59% down, Paris 1.60% down and Madrid 1.58% down.
Athens bucked the trend with a 3.64% rise.