Italy sold three-year debt at the lowest rate in almost two years, a day after Germany's top constitutional court paved the way for the European Central Bank and the European Union to buy bonds of nations in distress.

The Rome-based Treasury sold 4 billion euros ($5.2 billion) of its benchmark three-year bond to yield 2.75 percent, down from 4.65 percent at the last auction of the same securities on July 13. That was the lowest Italy paid on three-year debt since October 2010, according to Bloomberg data. Investors bid for 1.49 times the amount offered, down from 1.73 times on July 13.

"In a word, storming demand, full volume sold, with yields struck at auction well below secondary market levels, and cover strong, at least by Italian standards," Marc Ostwald, a fixed- income strategist at Monument Securities Ltd. in London, said in a note to investors. "This really does highlight how much good news is now being priced into the peripheral markets on the back of the OMT, the German ESM ruling and also hopes for QE3 today."