MILAN, Jan 28 (Reuters) - Italy's two-year borrowing costs fell to their lowest level since March 2010 at an auction on Monday, as the country took advantage of a queue of yield-hungry investors to sell its new zero-coupon bond.

The treasury issued 4 billion euros of a two-year zero-coupon paper maturing in December 2014, paying a yield of 1.434 percent and attracting a demand 1.45 times the offer.

At the end-December auction, Rome sold a similar bond maturing in September 2014 at a yield of 1.88 percent, with a bid-to-cover ratio of 1.69.

The treasury has also sold a new inflation-linked BTPei bond maturing in September 2018.

Italy, which has shifted around 10 percent of its annual funding needs already in the first two weeks of January, will tap the market again on Tuesday and Wednesday to sell up to 15 billion euros in bills and bonds.

(Reporting by Francesca Landini; editing by Jennifer Clark) Keywords: ITALY DEBT/2YEARS

(francesca.landini@thomsonreuters.com)(+39 02 66129437)(Reuters Messaging: reutersitaly.thomsonreuters@reuters.net)

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