ROME, Sept. 28 (Xinhua) -- Yields on Italian bonds approached 5 percent for the first time in more than a decade Thursday, after the government announced it would sign an anti-inflation pact, and approved a draft 2024 budget featuring weaker economic targets.
With the increase in bond rates, the "spread" on Italian bonds -- the difference between yields on bonds in Italy and those in Germany -- briefly widened to 200 basis points for the first time since the start of the year, before pulling back slightly.
Italian Prime Minister Giorgia Meloni on Thursday signed a pact to create an "anti-inflation quarter" with the help of Italian businesses. The measure will enter into effect on Sunday, the start of the year's final economic quarter.
Representatives from the country's retail, distribution, and industrial sectors have agreed to the terms of the deal, which will artificially lower consumer prices on a basket of basic necessities over the final three months of the year. Meloni said Thursday that the measure could be extended into 2024 if it is successful.
"This is an initiative that has a value that goes beyond the economic sphere," Meloni said.
The goal of the "anti-inflation quarter" is to lower inflation rates and help poor families make ends meet amid rising prices. However, critics have called it a kind of market manipulation.
Late on Wednesday, the Italian Cabinet of Ministers also approved its blueprint for the country's 2024 budget. This estimates a budget deficit equivalent to 4.3 percent of the country's gross domestic product (GDP), public debt of 140.1 percent of GDP, and a year-on-year economic growth rate of 1.2 percent.
The deficit is above the target of 3.0 percent for countries in the 20-nation euro currency zone, but this was expected. The estimates for public debt and economic growth represent downgrades from earlier predictions.
Bond markets reacted negatively to the latest developments.
The yield on Italy's benchmark ten-year bonds finished trading Thursday at 4.922 percent, slightly below its intra-day peak of 4.940 percent, and close to the 5-percent threshold. The last time yields on Italy's ten-year bonds were so high was in 2012. As recently as late 2021, Italian bond yields were just 0.595 percent, their lowest rate since the introduction of the euro currency.
The spread also widened to 200 basis points during inter-day trading Thursday, though it relaxed slightly to end the trading day at 195 basis points (1 basis point is the equivalent to 0.01 percent of yield). The last time the spread was so wide was in January of this year.
Amid these developments, the country's National Statistics Institute (ISTAT) reported Thursday that both consumer and business confidence have taken a hit, according to the results of its October survey. Consumer confidence fell to 105.4 points from 106.5 points a month earlier, while business confidence slipped to 104.9 points from 106.7 in September.
Both indicators use a 100-point baseline from 2010, adjusted upward or downward based on the responses to the ISTAT survey near the end of every month. ■