To me, this is the bond to watch: 2-year Italian bonds. We can look at the 10-year bond, and the 5-year, and those are ideally where Italy should be funding, but the fallback is always to take roll risk and move down the curve.
5.4% for 2 year money is scary. It starts taking the already bad strategy of shortening duration and makes it worse. Shortening is bad because you get big near term maturities that could become impossible to roll over, but at least you could expect to get cheap financing. That is out the window.
Italy 2-year is now yielding more than prior to the ECB rate cut. That policy tool isn’t helping Italy. Nor Spain. Short term rate cuts do not help anchor short end rates for countries that are trading as a “credit” product rather than a “rates” product.