What's happening in the headlines can affect you as an investor. Here's what's going on, what you need to know, and what you should expect.

The headline
The Financial Times is reporting that Italy's short-term funding costs were cut in half at a debt sale yesterday.

The details
There was healthy demand for both two-year bonds and six-month bills, with yields dramatically lower than at similar recent auctions. Italy sold the bonds at an average 4.85% yield compared with 7.8% last month and the bills at an average yield of 3.25%, dramatically lower than the eurozone record of 6.50% just one month ago.

Benchmark 10-year bond prices also rose for the first time in five days, with yields dropping 25 basis points to 6.75%, finally moving away from the 7% threshold that had forced other eurozone governments to seek bailouts. Italy is the eurozone's third-largest bond market.

Now what?
Coming just weeks after the most recent eurozone summit and the launch of the European Central Bank's emergency three-year loan program, this debt auction is being viewed as the first crucial test of market sentiment -- and a successful one. A bigger test, however, awaits on Thursday, when Italy will be selling more than $11 billion of its three-, seven-, and 10-year bonds. Will the market have confidence to go long on Italian sovereign debt? We'll just have to wait and see.

Until then, for investors on both sides of the Atlantic holding their collective breath over the resolution, or non-resolution, of the eurozone crisis, this short-term debt auction is positive news. Watch for markets to jump a bit, but don't expect them to stay up. The Dow (INDEX: ^DJI), the S&P (INDEX: ^GSPC), and the Nasdaq (INDEX: ^IXIC) have been on a roller coaster all year, and the financial crisis, now being expressed through the lens of distressed European sovereign debt, isn't over yet.

As always, Fools, don't have money in the market you're going to need over the next three to five years, keep an eye on the fundamentals of the companies you're invested in, and stay calm. Like us, you're in it for the long term.

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