Italian 10-year bonds fell, pushing yields toward the highestthis month, after the nation raised less than its maximum target atan auction of debt due between 2014 and 2022.

Portuguese and Spanish securities also declined and the euroweakened to a 15-month low against the dollar after Italy agreed topay a yield of 6.98 percent on securities maturing in 2022, closeto the 7 percent level that prompted euro-area peers to seekbailouts. German two-year yields fell to match a record low andbunds climbed for a third day as a government report showedinflation slowed in December.

“Yield levels around 7 percent are absolutely not sustainable,”said Michael Markovic, a senior fixed-income strategist at CreditSuisse Group AG in Zurich. “They could not sell the entire sizethey planned. It's not positive news for the stressedsovereign-debt markets in the euro zone.”