Seven rating upgrades and falling spreads: the BTp's year of grace

The unprecedented chain of seven promotions by rating agencies this year marked a year full of records for Italian BTp. The most substantial ones were earned in the markets, which brought Italian government bonds into sharp contrast with the rest of the Eurozone.

In comparison with the levels reached at the end of 2024, the ten-year BTp is in fact the only one to show a fall in yield, from 3.52% in the last session of last year to 3.46% at Friday's close. The drop is slight, of course; but it compares with the opposite dynamics experienced in all the other countries. Starting with the German Bund, which stood at 2.7% the day before yesterday, travelling 34 basis points above end-2024 levels. The same metric indicates an increase of 28 basis points for French and Irish ten-year bonds, in Portugal the rise is 20 points while it stands at 15 points in Spain, and even Greece, in its new but now rather consolidated role as another Mediterranean 'virtuoso', has seen yields rise by 10 basis points this year.

This development is obviously reflected in the spread picture. Here the performance during 2025 is all marked by a minus sign because Germany led the yield race after the Merz government's decision to deactivate the debt brake in order to finance the ten-year maxiprogramme of investments in defence and infrastructure. Compared to the Berlin benchmark, Italy's spread narrowed by 40 points, while the spread closed by almost 24 points in Greece, 19 in Spain and only 6 in France, which is struggling with the long political crisis that has blossomed around the attempts, so far in vain, to bring the deficit under control.

The impact of austerity on the public budget, measured in terms of savings on interest expenditure, is concentrated in these figures. The slowdown is not new, to the point that already at the end of last year the Parliamentary Budget Office had carried out an exercise that calculated at 17.1 billion over five years the reduction in the cost of debt servicing produced by yield curves that last Christmas were moving on average 30 points below the assumptions of the budget structural plan approved only three months earlier.

Figures of this kind obviously fluctuate along with the quotations on the markets, and are not to be understood as absolute reductions in expenditure but as the difference with respect to the expenditure that would have been incurred under previous conditions. But an important hand has also come from there in the containment of the deficit, which, barring surprises that are now unlikely, will be crushed below the 3% threshold this year (the EU Commission's calculators see it at 2.98%), allowing Italy, next April, to exit the excessive deficit procedure a year early.