Italy’s 10-year BTP yield fell below 4.50%, reaching a three-week low amid a broader decline in sovereign yields, as a higher-for-longer interest rate scenario raised concerns over costly AI investment. Despite lower yields, Europe’s fiscal concerns persist. Italy’s 2027 draft budget includes tax cuts and spending increases worth 0.98% of GDP, alongside an additional €10.7 billion contribution from the financial sector in 2027, equivalent to 0.21% of GDP. No similar contribution from energy firms was mentioned, despite previous speculation. The budget deficit is seen rising to 3.4% of GDP in 2027 from 2.9% this year, adding to debt sustainability concerns as Italy’s debt-to-GDP ratio is expected to surpass Greece’s this year as the eurozone’s most indebted country. ECB President Christine Lagarde noted that there were no signs yet of second-round inflationary effects from elevated energy prices, but markets still expect an ECB rate hike in December amid persistent inflation risks.