Italy raised €4.9 billion in a bond issue as the rate on three-year bonds rose sharply from the last such sale.
The Treasury had been hoping to raise a maximum of €5 billion.
Italy's borrowing costs had fallen in recent months after Prime Minister Mario Monti implemented a series of budget cuts and pension reforms.
But tensions have returned and in an auction of short-term debt yesterday which raised €11 billion, Italy saw its borrowing costs double.
"We made the choice not to take all of the demand because we do not have the urgency to raise funding at rates that we do not believe are right," Vittorio Grilli, a junior economy minister, told reporters after the auction.
Today's sale included €2.88 billion raised in bonds due in November 2015 at a rate of 3.89% compared to 2.76% last month.
The Treasury also sold €395m in bonds due in November 2015 at 3.92%, €687m in bonds due in 2020 at a rate of 5.04% and €918m in bonds due in 2023 at a rate of 5.57%. 2-month bonds were sold at a rate of 2.84% compared to 1.492% before and bonds due in July 2012 went for 1.249% compared to 0.492% before.
Italy has to raise around €450 billion on the markets this year.
