The spread rises again and puts Italian public debt back under pressure. After a start to the session marked by fluctuations, the differential between BTPs and Bunds reaches 131 basis points, on April 2025 levels. The yield on the ten-year Italian bond also rises, reaching 4.7%.
These are two signals to be read together: the return required by investors to purchase Italian debt is increasing and the gap with Germany is widening. If these conditions were to last, it would become more expensive for the State to raise money on the market, with progressive consequences on public finances.
What is the spread and why does it increase
The spread is the difference between the yield of the ten-year Italian BTP and that of the German Bund of the same duration, considered the reference for the euro area. It is measured in basis points: one hundred points equals one percentage point. At 131, therefore, the Italian stock yields 1.31 percentage points more than the German one. It is the additional yield required by the market to hold Italian debt compared to that of Germany.
The differential can increase because the BTP yield rises, because the Bund yield falls or due to a combination of the two movements. When uncertainty grows, investors can favor German bonds: purchases cause their prices to rise and their yields to fall, widening the gap with other countries.
It is a dynamic that is also visible in today’s session, Friday 2 October. Second ReutersGerman stocks benefited from the search for safety, while Italian and French stocks recorded a less favorable performance. The widening of the spread, therefore, must also be read in light of the Bund’s movements.
What changes for public debt
To understand how much it costs to finance itself, the State must look above all at the returns on the securities it issues. The 4.7% of the ten-year BTP is an indication of the market conditions on that maturity: if they remain high, they tend to also be reflected in new Treasury issues.
This doesn’t mean that all government debt suddenly starts paying 4.7% interest. Bonds already issued at a fixed rate retain the envisaged conditions. The increase is gradually transmitted, when the State places new debt or replaces securities that have reached maturity.
An example helps to understand the order of magnitude: out of 100 billion euros of new issues, an annual cost higher than one percentage point would lead, in a simplified calculation, to an extra billion in interest every year. It is not a forecast of Italian spending, which depends on amounts, deadlines and instruments actually placed.
The risk is that an increasing share of public revenues will have to be allocated to interest, narrowing the space for health, education, infrastructure or tax cuts. Tax cuts or increases are not automatically triggered: the consequences depend on the duration of the increase, economic growth and budget choices.
The most unfavorable combination would be more expensive financing and a weak economy. If interest spending increases while growth slows, stabilizing the debt-to-GDP ratio becomes more difficult.
The France case and international tensions
The pressure on BTPs is part of a phase of international tension. The weeks of selling in bond markets were also fueled by rising energy prices linked to the war between the United States, Israel and Iran.
In Europe, one of the main points of tension is France. The spread between French and German bonds exceeded 150 basis points, the highest level since the 2011 euro area debt crisis. Concerns about public finances and political uncertainty ahead of the 2027 elections are weighing on the markets.
For Rome, the risk is that greater caution towards French debt will push investors to ask for a higher premium also from other highly indebted countries. However, the sustainability of Italian accounts continues to depend on national conditions: growth, budget balance and ability to maintain the debt path credible. But there is no doubt that the rise in the spread could also influence the next draft of the future budget law.