FX.co ★ Italy 10-Year Yields Hold Near Two-Week Lows

The yield on Italy's 10-year BTP is approximately 3.54%, nearing the mid-September low, bolstered by ongoing fiscal improvements. Italy is setting a target to reduce its budget deficit to 3% of GDP by 2025, aligning with the EU's threshold for the first time since 2019, and surpassing the previous target of 3.3%. This progress is largely attributed to better-than-expected tax revenues and reduced debt servicing costs. Nonetheless, economic momentum is sluggish due to the impact of US trade tariffs, which have led to a downward revision of the GDP growth forecast for 2025 to 0.5%, down from 0.6%, and for 2026 to 0.7%, down from 0.8%. Meanwhile, Italy's public debt ratio, which is the second highest in the euro area after Greece, is projected to rise to 137.4% of GDP by 2026 before declining gradually. Across the Eurozone, renewed inflationary pressures are strengthening expectations that the European Central Bank will hold back from additional rate cuts in the current economic cycle.