MILAN, Jan 29 (Reuters) - Italy's six-month yields fell to their lowest in nearly three years at an auction on Tuesday as investors snapped up higher-yielding debt, shrugging off domestic woes at Banca Monte dei Paschi.
Rome issued 8.5 billion euros ($11.4 billion) of six-month bills, paying a return of 0.73 percent, down from 0.95 percent at a similar sale at the end of December.
Although this was the lowest yield the treasury paid for an issue of its type since March 2010, traders said it was still attractive if compared with the almost zero return on German paper.
The auction outcome was not influenced by the scandal of Monte Paschi, traders said, as investors see the bank's troubles as an isolated case with no negative fallout for the country's banking system.
Italy's third-biggest bank revealed last week complex derivatives trades that could lead to losses of as much as 720 million euros. ($1 = 0.7429 euros) (Reporting by Francesca Landini, editing by Danilo Masoni)