Is the ECB's Carry Trade starting to work?

From the NY Times

The sale of €9 billion, or $11.8 billion, of six-month Treasury bills was seen as the first post-holiday pointer to the continuing woes of the euro zone.The debt sold at 3.251 percent, sharply down from 6.504 percent at a previous auction in late November. Demand was 1.7 times the amount on offer, compared with 1.47 times previously

The first *real* datapoint is later today when Italy sells a few billion in 10-year bonds - these have been trading at 7% in the secondary market, a level that is clearly unsustainable.
That said, you could claim that anything above 2% is unsustainable, given that Italy's growth rate is - effectively - zero...