Italy faces test of ability to borrow affordably at bond auction after indecisive election

Italy is facing a test of its ability to borrow money at affordable rates after an indecisive election.

Italy is selling up to €4 billion ($5.2 billion) in 10-year bonds Wednesday and up to €2.5 billion in five-year bonds in what UniCredit analysts are calling a "challenging environment."

Borrowing costs are a key factor as Europe tries to keep its government debt crisis from flaring up again. Markets and politicians are watching to see if Italy's bond interest costs rise in light of the election results.

Italy's 10-year bond yielded around 4.86 percent ahead of the auction, up around 0.4 percent from before the election but well below 7 percent levels at the height of the crisis.