LONDON, Oct 16 (Reuters) - Italian government bond yields dropped across the board on Tuesday, narrowing the spread over German peers, after Italian Economy Ministry Giovanni Tria said he was confident he could explain Italy’s expansionary budget plans to the European Union.
Italian bond yields were down 2.5 to 6 basis points in early trade, with two-year yields 6 bps lower at 1.70 percent and 10-year yields down 3.5 bps at 3.52 percent.
The closely watched Italy/Germany 10-year bond yield spread tightened 8 basis points to 300 bps.
The Italian cabinet on Monday signed off on an expansionary 2019 budget, boosting welfare spending, cutting the retirement age and hiking the deficit to set up a showdown with authorities in Brussels over compliance with EU rules. (Reporting by Abhinav Ramnarayan; Editing by Dhara Ranasinghe)