The yield on the 10-year Italian BTP was around 3.62%, below six-month highs touched early in the month, and tracking a global decline in bond yields. This movement followed President Trump’s decision not to impose tariffs on Inauguration Day, as many had anticipated, although he later signaled plans for a 25% levy on Canada and Mexico starting February 1st. In Europe, ECB policymakers have urged caution regarding further rate cuts. The ECB has already reduced interest rates four times since June and is expected to continue its easing cycle next week. Market forecasts suggest additional rate cuts could extend into the next six months, potentially leaving rates above 2% by the end of 2025. The spread between Italian and German yields, a measure of the risk premium for holding Italian debt, stood at approximately 111 basis points. This compares to a low of 104.5 bps reached in early December, marking the narrowest level since October 2021.
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