Italy's Borrowing Costs Rise After Credit Rating Cuts

ROME, Mar. 14 -- Italy's borrowing costs rose on Wednesday to their highest since December after the country's credit rating was cut from A- to BBB+ by Fitch rating agency last week.

Italy sold 3.3 billion euros (4.2 billion U.S. dollars) of three-year bonds, paying a yield of 2.48 percent compared to 2.3 percent at a similar sale in mid-February.

The Italian government also sold 2 billion euros of 15-year bonds at a yield of 4.90 percent. Demand was weaker than expected, with bids of 1.28 times the offer amount for both the auctions.

Fitch assigned a negative outlook to Italy due to the "inconclusive result" of last month's national election. It said the country's recession was one of the deepest in Europe estimating that its gross domestic product (GDP) in 2013 will contract 1.8 percent.

On Wednesday, Ficth also downgraded its credit rating for most of Italy's regional and provincial governments and city councils. In most cases, including capital Rome and business city Milan, the downgrade was the same as Italy's demotion of one notch.