Research Briefing | Feb 15, 2022

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.
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