FX.co ★ Italy 10-Year BTPs Pull Back Amid Market Pause

Yields on Italy's 10-year BTPs settled around 3.51%, down from 3.58% recorded on December 22, as investors take a pause following the global sell-off. The European Central Bank (ECB) refrained from altering interest rates for the fourth consecutive session last week. ECB's hawkish policymaker Isabel Schnabel noted that there is currently no urgent need for a rate hike; however, ongoing inflationary pressures indicate that borrowing costs might increase further. Market expectations reflect about a 40% probability of an ECB rate hike by March 2027. In the United States, the market anticipates two quarter-point rate cuts by the Federal Reserve in 2026, influenced by signals of easing inflation and a slowing labor market. On the domestic front, the Italian Parliament passed a budget amendment stating that the central bank's gold reserves belong to "the people," sparking concerns about central bank independence and fiscal transparency. This measure still awaits approval from both legislative chambers, with the 2026 budget anticipated to be finalized by year-end.