Economist: The yield spread between 10-year government bonds in Italy and Germany may narrow to 60 basis points next year.

Global economist Mohit Kumar stated in a report that Jefferies remains bullish on Italy and expects the yield spread to narrow further in the early next year. He said, "In terms of rates, we continue to be positive on Italy and expect the yield spread with German bonds to further narrow to 60 basis points in the first quarter of 2026." Kumar mentioned that the favorable interest rate environment, lack of specific risk factors, and Germany's fiscal expansion continue to be positive for Italy's yield spread until 2026. Jefferies has been long on Italian government bonds for the past few months and continues to maintain this trade. According to Tradeweb data, the yield spread between Italian and German 10-year government bonds is currently at 75 basis points.