Italian bonds rose for a fourth day as the nation prepared to sell as much as €4.75 billion of bonds after European Central Bank President Mario Draghi said there are signs the economy is stabilising.

Ten-year Italian yields headed for their biggest weekly decline since August 12th. The securities rallied yesterday after the nation sold €8.5 billion of one-year bills at less than half the yield at the previous sale.

The Mediterranean nation is set to auction debt maturing in 2014 and 2018 today. Spanish bonds rose and German bunds declined.

"There are good signs at the moment that periphery paper is well accepted by the market," said Annalisa Piazza, a fixed-income analyst at Newedge Group in London. In today's auction "the amount on offer is relatively low. That should be well received," she said.

The yield on 10-year Italian bonds fell 16 basis points, or 0.16 percentage point, to 6.47 per cent this morning.

The rate on Spanish 10-year bonds declined four basis points to 5.09 per cent. Germany's benchmark 10-year bund yield rose one basis point to 1.85 per cent.

"There are tentative signs of stabilisation of economic activity at low levels," Draghi said at a news conference in Frankfurt yesterday, damping demand for the safest government debt securities. Central bank policy makers held the benchmark interest rate at 1 per cent after injecting a record €489 billion into the financial system last month through the provision of three-year loans.

German government bonds are little changed this year, after gaining 9.7 per cent in 2011, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.

Oil advanced in New York, trimming the biggest weekly decline in a month, as signs Europe's debt crisis is easing countered indications a proposed embargo on Iranian crude will be delayed.

Bloomberg