Italian Bond Yields Fall, Ruling Coalition Vows to Keep Deficit Under 2%

Benchmark Italian bond yields fell on Tuesday as the ruling coalition appears to be nearing a compromise regarding the country’s 2019 budget, vowing to keep the deficit under 2% of its gross domestic product. The 10-year yield fell to 2.89 after reaching a two-week high of 2.96 just yesterday.

Since the beginning of May, yields on the benchmark 10-year Italian bond has spiked past 3%. Italian bonds have faced mounting pressure the last few months since the anti-establishment coalition of the right-wing League and the 5-Star Movement took over office in June.

“It looks like a compromise is taking shape,” said Martin van Vliet, senior rates strategist at ING. “Everyone assumes it (the deficit forecast) will be around 2 percent.”


Analysts have reported that the Italian government will unveil a deficit plan for 2019 that will include a 36 billion euros investment package.

During a meeting with Italian prime minister Giuseppe Conte last month, US President Donald Trump purportedly offered Italy assistance in buying the country’s sovereign bonds next year in the face of the country’s distressed financial health, which could have ripple effect implications to the rest of the Eurozone.