Italian government's borrowing costs drop in debt sale despite bitter election campaign

Financial markets appear to be shrugging off worries over a bitter election campaign in Italy, with the government paying the lowest rate in three years to raise 12-month money on bond markets.

The Italian treasury auctioned off €8.5 billion ($11.1 billion) in Treasury bills Thursday, paying an interest rate of 0.86 percent, the lowest since January 2010. It paid 1.46 percent on a similar bill in mid-December.

Polls show the center-left party substantially in the lead ahead of general elections in February. But the media have been filled with speculation it may not win a clear majority in both houses of parliament.

Analysts for UniCredit, Italy's largest bank, say this may actually be positive, forcing the left into cooperating with the reform-minded centrist parties led by outgoing Premier Mario Monti.