MILAN, May 30 (Reuters) - Italy's funding costs rose sharply at a bond sale on Wednesday, with 10-year yields topping 6 percent for the first time since January, as the debt-laden euro zone economy appears vulnerable to worsening debt troubles in neighbouring Spain.
Italy raised 5.73 billion euros at the auction, above the mid-point of a planned issue range of 4.50-6.25 billion euros, helped by steady domestic demand despite a dearth of bond redemptions this month.
It sold a new five-year bond due in June 2017 at an average 5.66 percent yield, the highest since December and 80 basis points more than what it paid on a similar maturity a month ago. The sale was covered 1.35 times, broadly in line with the previous auction at the end of April.
The Treasury also placed a new tranche of the September 2022 10-year benchmark at 6.03 percent, a new high since January. A month ago it had sold the same bond at an average 5.84 percent yield. The bid-to-cover ratio was largely stable at 1.4 times.
Wednesday's sale brings Italy's overall debt issuance this week to 18.5 billion euros.
Analysts expect bond market volatility and investors' risk aversion to stay high ahead of the election of a new Greek government in mid-June, key to determin whether Greece will remain in the euro zone.