MNI: Italian Gov't Sees Yields Declining Despite Trump
MNI (ROME) - The Italian government anticipates at least 50 basis points of European Central Bank interest rate cuts next year—adding to an anticipated 25-basis-point reduction in December—to align with its borrowing cost forecasts for the 2025 budget, two sources close to the matter told MNI.
A government official noted that Rome expects Italian yields to decline due to monetary policy easing, despite tighter financial conditions spurred by Donald Trump’s U.S. election victory.
“Anything more than 50 [basis points in 2025] would help us in what we expect to pay for interest next year,” one source said.
The Italian government has been pleased with the country’s ability to navigate the ECB’s tightening cycle, which even saw a reduction in average debt costs in 2023, the sources added. They attributed this partly to a strategic shift towards national retail investors, which has helped contain borrowing costs. (See MNI SOURCES: ECB Heads For 25BP Cut; Risks From Trump, Germany)
In guidelines for Italy’s 2025 budget, the Finance Ministry noted that interest expenditure was expected to rise from 2024 onward due to ECB tightening.
“This impact, however, will be mitigated by the high average life of the debt, as well as by the easing of monetary tightening initiated by the ECB during 2024 with the two cuts in key interest rates in June and September,” the document said.
The government does not foresee a return to ECB asset purchases in the near term, and the current easing cycle won’t change this cautious approach.
Investors currently expect eurozone yields will fall as the ECB cuts, despite Trump, but Italian BTPs are seen as vulnerable if spreads widen if moves such as U.S. tariff increases raise global growth concerns.