Italy’s 10-Year BTP yield traded around 4.7%, easing from its highest level in three years of 4.74%, as traders assessed elevated inflation against Europe’s fiscal backdrop. Eurozone inflation rose to its highest level in three years, as anticipated, supporting bets of a third ECB rate hike by year-end. However, mounting concerns over debt affordability and government spending linked to elevated energy costs in highly indebted member states have scaled back market bets on the scope of ECB hikes to two or three next year, down from four previously. Italy’s budget deficit was confirmed at 3.1% of GDP in 2025, above the EU’s EDP ceiling, although the government seeks to shrink its deficit amid reports of a planned cut in defense spending to 0.6% of output from 0.9%, with confirmation due later on Friday. The cut could ease concerns that have lifted yields to multi-year highs, as the spread between the BTP and safe-haven Bund recorded its biggest daily jump since 2020 on October 1st.