European government bond prices dropped sharply on Thursday as investors took fright at Italy’s larger than expected budget deficit and mounting concerns that central banks will keep interest rates high for an extended period.
Italian 10-year government bond yields rose as much as 0.17 percentage points to 4.96 per cent, their highest level in a decade, after Prime Minister Giorgia Meloni’s government raised its fiscal deficit targets and cut its growth forecast for this year and next. The yield later fell back to 4.88 per cent.
The sell-off spread to UK markets, where 10-year yields rose as much as 0.2 percentage points to 4.57 per cent — the biggest daily rise since February — before ending the day at 4.48 per cent. Investors said concerns that the US Federal Reserve would hold rates “higher for longer” were spreading to European markets.
Read the full story on the Financial Times here.