Italian two-year notes fell, pushing the yield to the highest in a week, and Spanish securities declined after borrowing costs rose at debt auctions.

Spain's bonds dropped a second day after Moody's Investors Service downgraded 28 Spanish banks and Bundesbank President Jens Weidmann said there can be no pooling of issuance in Europe until governments agree to give up their fiscal sovereignty. Italian securities slid as the government said it would sell at least 30 billion euros ($37.5 billion) of new bonds in the third quarter. German bunds fell.

"People still demand a sizable concession to take down these bonds," Jamie Searle, a fixed-income strategist at Citigroup Inc. in London, said before today's auctions.

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