Rising sovereign yields will not derail debt dynamics in Italy

The ECB’s unexpectedly hawkish shift tone prompted a sizeable market reaction, with Italian 10-year bond yields rising 55bps, to 1.95%. However, we don’t believe higher yields per se, coupled with fiscal policies over the medium term, will derail Italian debt dynamics.

What you will learn:

• The current situation, moreover, is different than previous episodes, such as the 2011-2012 debt crisis or the 2018 political turmoil.
• This time, the sell-off began with the repricing of the risk-free rate rather than by some uniquely Italian factors.
• Italy is not lagging the eurozone and the effective interest rate at around 2% is at its lowest level.