Greek two-year notes slumped, driving yields to a euro-era record, on concern a second bailout for the nation will be delayed because of disagreement on a collateral deal.

Italian two-year notes declined for a second day as the nation prepared to sell 10.5 billion euros ($15.1 billion) of short-maturity debt this week. The European Central Bank bought Italian and Spanish government bonds today, according to people familiar with the transactions. Greek yields surged as risks over fresh aid intensified after the Finnish government said Aug. 16 it secured a collateral arrangement to ensure its contribution would be repaid. Germany sold 10-year bunds.

"There are concerns that the second aid package won't go through," said Christoph Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt. "If Finland sticks to its word and demands collateral, we will be in a gridlock situation."