On Friday, yields on Italian debt increased ahead of a watershed election that may observe a new far-right coalition take power in Italy’s both houses of parliament.

As of 06:37 EST (10:37 GMT), the yield on the benchmark Italy 10-Year bond had increased to 4.277 per cent after it closed the previous day at 4.191 per cent. In Friday trading, the Italy 2-Year bond had also touched as high as 3.038 per cent. Bond prices typically drop as yields rise.

The election is to be held in Italy on 25 September 2022. Giorgia Meloni, the president of the nationalist ‘Brothers of Italy party, is expected to garner 25.2 per cent of the vote. The bloc would also include leader Matteo Salvini’s ‘League’ and ‘Forza Italia’ parties of former Prime Minister Silvio Berlusconi.

Meloni has promised to put in place stricter curbs on immigration and slash taxes. She has also vowed to adhere to EU budget policies to ensure that Italy receives crucial tranches of a €200B aid package from Belgium. Rome would need to meet 55 new policy targets to receive the next round of payments in December.

Without the funds, the expected coalition would find it hard to revive growth, especially in an environment of sharply increasing interest rates that raise the cost of servicing Italy’s huge debt burden. Debt, in relation to gross domestic product of the country, has inflated to 151 per cent and may grow even further without the cash injections by the EU.