Italian borrowing costs have fallen early on Wednesday morning as investors digested news that Rome could lower its public spending in the coming years.

The yield on the 10-year Italian bond fell 3.31 percent at about 7.40 a.m. London time.

The market reaction followed reports by the Italian newspaper Corriere della Sera that the government is planning to lower public deficit from 2.2 percent in 2020, to 2 percent in 2021, from an expected 2.4 percent next year.

This was seen as a relief for bond markets, especially since the bond market has been on a roller-coaster ride in the last few weeks.

Investors have been on the edge regarding extra spending in Italy since the appointment of a populist coalition government, last Spring. The cabinet has promised a number of populist measures that risk the stability of Italy's finances.

As a result, Italy announced last week that the deficit for 2019 would be 2.4 percent of GDP, to incorporate the different populist measures. Markets were not pleased with the number, given that it was three times higher than what the previous cabinet had planned.