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UPDATE 1-Italy's one-year bond yield rises at auction

(Adds analyst's comments)

MILAN, Oct 10 (Reuters) - Italy's one-year borrowing costs rose at an auction on Wednesday as persistent uncertainty over whether Spain will request a bailout cut investor appetite for short-dated peripheral debt. � The Treasury sold 8 billion euros bills maturing on Oct. 14 2013 at yield of 1.94 percent, in line with the market price and compared with 1.69 percent at an equivalent sale in mid-September.

But the interest rate remained well below the yield of just under 4 percent paid at a mid-June auction.

"Yields have gone up in line with the market move seen in recent days, but there is nothing to worry about," said Alessandro Giansanti, bond analyst at ING.

Italy's borrowing costs have fallen over the past month thanks to a pledge by the European Central Bank to intervene in the bond market to help weaker euro zone countries.

However, the market mood has become more cautious in recent days because of uncertainty over Spain's readiness to request the financial aid that would trigger the ECB new bond-buying scheme.

Investors expect that Madrid will ultimately be forced to ask for help. But with no signs of that being imminent, the government bonds of both Spain and Italy have retraced some of the gains posted in recent weeks.

On Wednesday the Treasury also issued 3 billion euros of three-month bills with a yield of 0.765 percent, slightly up from 0.7 percent at a mid-September auction.

The amount raised on both maturities was in line with the treasury's target.

(Reporting by Francesca Landini; Editing by John Stonestreet)

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

Keywords: ITALY DEBT/