The Italian Treasury paid sharply less to borrow money for six months than it did a month ago, giving the financially strapped government a round of holiday cheer.

But some traders said the more important sale comes Thursday, when the government will sell 10-year debt, among other maturities. That is considered a bigger test given that yields for that maturity remain close to 7%, the borrowing threshold that analysts describe as unsustainable over the longer term.

The sale "will show whether investors are becoming more confident in the Italian bond market," said Mary Nicola, currency strategist at BNP Paribas.

Italy sold the planned €9 billion ($11.76 billion) of six-month treasury bills at an average yield of 3.251%, down from an average yield of 6.504% at November's auction, a euro-era high, and even below the 3.535% average yield registered at the October auction for six-month bills.

The treasury also sold €1.733 billion of two-year zero-coupon notes, closer to the lower end of its target range, at a yield of 4.853%, down from 7.814% a month earlier.