(Bloomberg) -- Italian bonds led a drop in European government debt after a report that Brussels is set to warn the nation its deficit may breach targets.
Yields on the securities extended an increase this week after La Repubblica newspaper reported the EU Commission sees slower growth lifting the country’s debt-to-gross domestic product ratio to 2.9 percent next year instead of the government’s 2.4 percent target. The shortfall could then breach the bloc’s 3 percent limit in 2020, the newspaper said.
Italy’s bonds have stabilized since avoiding being downgraded to junk by Moody’s Investors Service and S&P Global (NYSE:SPGI) Global Ratings last month, though frictions with the European Union could derail the recovery. The nation’s leaders have until Nov. 13 to submit revised spending plans after the Commission rejected their initial proposals.
Ten-year yields rose three basis points to 3.37 percent, with the spread over those on their German peers climbing two basis points to 291 basis points.
The Commission projects that economic growth could be one third lower than the 1.5 percent targeted by the coalition government for next year, La Repubblica reported, without saying how it obtained the information.
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