Arbitrage through the ECB

Here is the new short-term auction of Italian debt:

The debt sold at 3.251 percent, sharply down from 6.504 percent at a previous auction in late November. Demand was 1.7 times the amount on offer, compared with 1.47 times previously.

Of course it is the long-term debt auction, due tomorrow, which is going to matter.  Here is a very good Edward Hugh essay on Italy.