Italy\'s borrowing rates shot up to a new high on Tuesday, breaking through the 7.0-percent warning threshold, with an inversion in the yield curve reflecting investor concern that the country could default. At a bond sale closely watched by investors worried that the country could need a bailout, the rates on bonds with shorter maturities were higher than on longer maturities, an inversion of the normal rise of a yield curve. The Treasury raised 7.5 billion euros ($10.05 billion) with bonds to expire in 2014, 2020 and 2022, falling slightly short of its target of between 5.0 and 8.0 billion euros but temporarily reassuring the markets. But yield on bonds maturing in 2014 shot up to 7.89 percent from 4.93 percent, while rates on those expiring in 2022 rose to 7.56 percent compared to 6.06 percent at the last similar operation -- causing a yield curve inversion. Interest on bonds due in 2020 also rose from 5.47 percent to 7.28 percent. Because time is risk, the interest rate on long-term loans is usually higher than rates on shorter term lending. It is the first time recently that the yields have inverted on the Italian primary market, though the distortion began several days ago on the secondary market for already issued debt. \"It means that the markets perceive a serious risk of default in the short term,\" said Sergio Capaldi, bond strategist with Italy\'s Intesa Sanpaolo bank. Although the Milan index had risen in line with other European stock markets following the bond sale, by early afternoon it had dropped to show a gain of less than 0.29 percent. On Friday, Italy had to pay 6.504 percent to borrow money for six months. Interest rates this high are considered unsustainable in the long term for Italy, which is struggling to reduce an unwieldy debt mountain of 1,900 billion euros -- around 120 percent of its Gross Domestic Product. \"We can see the glass as half empty or half full,\" said Ciaran O\'Hagan, bond strategist with the French bank Societe Generale. \"It went well, the bonds were sold but Italy cannot pay rates at that level every month. It\'s not tenable in the longer term,\" he said. Capaldi said that while the fears Italy would not find takers for its debt had not been realised, \"the rates are at scandalous levels.\" \"It\'s a price Italy cannot pay for more than a few quarters. All emissions at rates over 7.0 percent bring us closer to the moment Italy will need external help,\" he said. An inversion of yields means that the usual equation of longer loans with higher risk has been distorted. Greece, Ireland and Portugal all saw their yield curves invert before being forced to ask for emergency funds. The head of the International Monetary Fund (IMF), Christine Lagarde, said on Monday that the fund had not received any request for aid from Italy, despite rumours of a bailout of up to 600 billion euros for the ailing economy. In an attempt to win back investor confidence, Prime Minister Mario Monti\'s government is set to announce new measures at the beginning of next week, aimed at balancing the budget by 2013 and relaunch the country\'s anaemic growth. Amid repeated warnings that Italy may be too big to bail out, eurozone markets are hoping the European Central Bank (ECB) will buy up more Italian debt to drive down rates -- an idea strongly opposed, however, by Germany.