Italian and Spanish bonds jumped as borrowing costs slid at auctions and the European Central Bank kept its benchmark interest rate unchanged. German debt slipped.

The advance pushed Spanish two-year note yields to the lowest since March. The government sold 10 billion euros ($12.7 billion) of notes, twice the sales target, while Italy auctioned 12 billion euros of bills, easing concern the countries would struggle to finance their debts. The ECB held its main rate at 1 percent, an outcome predicted by economists in a Bloomberg survey. German 10-year bunds pared declines as reports showed U.S. retail sales and jobless claims missed estimates.

"The carry trade, with banks borrowing from the ECB and then investing in short-term government notes, will continue to be supportive for Spanish and Italian" debt, said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam.