Rome, December 12 - The spread between 10-year Italian bonds and the German benchmark slid towards the 330-basis-points mark on Wednesday after a successful auction of state paper. The spread, a key measure of Italy's borrowing costs and of investor confidence, spiked above 360 points before closing at 351 on Monday after Premier Mario Monti announced at the weekend he would quit when the 2013 budget law is approved. The announcement, which came after Silvio Berlusconi's People of Freedom (PdL) party withdrew its support and the ex-premier said he would stand for office again, sparked concern about whether Italy would continue with Monti's policies of economic reform and fiscal discipline. But some calm now seems to have returned to bond markets. The spread dropped to 340 points on Tuesday with a yield of 4.72%. It fell further, to 333 points with a yield of 4.68%, on Wednesday after the Treasury said 12-month bonds dropped to an eight-month low in an auction in which 6.5 billion euros worth of state paper was sold. The average interest rate set was 1.456%, the lowest since March. The rate was 1.762% at a similar auction in November.