Overview

• Italian 10‑year yields came within five basis points of French levels on August 15, the narrowest gap since 2005, with parts of the curve already at parity.
• The five‑year spread effectively vanished from mid‑July, signaling a sharp reappraisal of relative sovereign risk across the two countries.
• Analysts at Commerzbank and Nomura, along with economist Andrew Kenningham, say the differential could soon reach zero and even invert, implying higher French borrowing costs.
• Italy’s improved standing is linked to deficit consolidation and political stability, with tax and social receipts up 8.4% year‑to‑date through June and a stated goal of pushing the deficit below 3% in 2026.
• France has faced wider deficit projections and frequent government changes, and while Paris is not yet paying more than Rome to borrow, several reports say that shift could come within days or weeks.