The yield on Italy's 10-year government bonds fell below that of France for the first time.

On Thursday, the yield of Italy's 10-year government bonds fell below the yield of similar bonds in France for the first time, reflecting investors' cautious attitude towards the country following the collapse of the French government, as well as a relative increase in confidence in Italy. According to data from the London Stock Exchange Group, the yield spread between the two countries' government bonds narrowed to zero for the first time. This spread has narrowed from around 50 basis points in April, when it reached as high as 200 basis points during the 2020 COVID-19 crisis. This marks a historic shift in investor sentiment towards both countries: France has traditionally been seen as one of the safest borrowing countries in the Eurozone, while Italy's fiscal problems during the 2012 sovereign debt crisis seriously threatened Eurozone stability. In recent months, the yield of France's 10-year government bonds has been steadily increasing due to concerns about public fiscal sustainability and economic downturn weakening investors' preference for French debt. Meanwhile, Italy's political stability and a credible path to debt reduction recognized by investors have allowed its government bond spread to continue benefiting from rising risk assets and the European Central Bank's loose monetary policy since the end of 2023.