Btp-Bund spread at 102.9 points, Italian yield at 4.61% while the government prepares the budget law

Looking specifically at the spread between the Italian and German ten-year bonds, we see that at the beginning of September this was around 84 points. On September 29th the spread then rose to 100 points and today, September 30th, it closed at 102.9 points. The yield of the Italian bond rose to 4.61%, while the German one was stable at 3.58%.

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In this context, it should be remembered that the spread does not measure how well the German economy is doing compared to the Italian one, but indicates the difference between the yield of the two ten-year bonds. In essence, the spread photographs the relationship with Germany, that is, with the country considered - at least until now - the point of reference for the Euro area.

And, even if the Berlin Bund is the reference, it should not be forgotten that Germany recently abandoned years of extreme fiscal prudence to finance mainly infrastructure and defense. And which, like the rest of the EU, is also having to deal with the consequences of the conflict in the Middle East on the energy sector.

Then there is also the "ECB factor" to consider, with the European Central Bank which, on 10 September, raised interest rates by a quarter of a percentage point. Inflation certainly weighed on the decision, which jumped to 3.3% in August and to the highest since September 2023, with the rush of gas and oil. And the new tightening came after the one in June and after the break in July. The ECB itself, however, also underlined that the increase in long-term yields is not a specifically European phenomenon, but a global one.

And in this climate, the Meloni government is getting to the heart of the budget law, after failing to exit the EU procedure early due to excessive deficit. First of all, coverage is needed and the debt must be stabilized, given that we are talking about a figure of around 138% of GDP this year and next year, compared to 137.1% in 2025. The unknown comes from the new geopolitical scenario, also made unpredictable by Donald Trump's second presidency in the USA.

Meanwhile, yesterday the Mef auctioned eight billion BTPs, with the ten-year bond paying 4.58%, a level not seen for three years. As late as August 15th, the BTP was paying 4%: Prometeia's estimates say that the additional cost of 60 basis points, accumulated in just over a month, amounts to around two billion euros in higher interest in the first year, and then grows as the debt is refinanced. All this on an interest expense that is already worth around 85 billion euros every year.

In any case, from Palazzo Chigi we continue to look at growth with a certain optimism. Various forecasters have revised their estimates upwards and agreed on a 2026 GDP of +0.8/0.9%. And therefore it is probable that the +0.6% indicated by the government in April in the DFP could undergo an upward adjustment. There is also a wait for the 2026 debt figure: if, as indicated by the Minister of Economy Giancarlo Giorgetti, the exit from the excessive deficit procedure can be achieved in 2027, the bar should not move too far from the 2.9% set in the spring.

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