ROME, Oct. 4 (Xinhua) -- Yields on Italian government bonds topped the 5 percent threshold for the first time in more than a decade on Wednesday, continuing a weeks-long trend that has seen yields pushed higher amid concerns over interest rates, economic growth and inflation.
The government's benchmark ten-year bond yield peaked at 5.012 percent in early trading on secondary markets, before retreating slightly and closing Wednesday's session at 4.907 percent.
The last time the yield on Italian government bonds was so high was in August 2012. Since then, bond yields in Italy have dropped and fluctuated for the past ten years before rising again in early 2021.
Analysts said that the rise in bond yields across Europe over the last 18 months has been mostly powered by high inflation, stemming from an interruption in energy supplies due to the Ukraine crisis, and an increase in the lending rate from the European Central Bank (ECB). The ECB has increased its baseline rate in ten consecutive sessions.
Higher bond yields reflect investors' worries about a country's ability to repay its debt over the long term. Higher yields are a drag on the economy, since they increase the cost of borrowing money for governments.
According to Javier Noriega, an economist with Milan-based investment bank Hildebrandt and Ferrar, Italy has been particularly hard hit when it comes to bond yields. This is due to concerns over a slowing economy and the fact that inflation, which has been high across Europe, has been even higher in Italy.
Additionally, estimates for the Italian economy were weakened in a blueprint for the country's 2024 budget released last week. Italy's Cabinet of Ministers estimated 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 next year.
The deficit is above the target of 3 percent for countries in the eurozone, and the estimates for public debt and economic growth represent downgrades from earlier forecasts.
"All European countries are being impacted by some broad factors and there are additional factors pushing bond yields higher in Italy," Noriega told Xinhua. ■