FX.co ★ Italy 10-Year Yields Slip Toward 1-Year Low

Yields on Italy’s 10-year BTPs declined to 3.4%, marking the lowest point since December 2024. This decrease is attributed to Italian fiscal measures coupled with heightened expectations for rate cuts by the Federal Reserve. The Italian government has proposed a €3.5 billion levy targeting banks and insurers to support its budget for 2026–2028, aiming to reduce the budget deficit from 3.3% of GDP in 2025 to 2.8% in 2026. Concurrently, Federal Reserve Chair Jerome Powell pointed to weaknesses in the US labor market, further fueling predictions of another rate cut this month. Investors are also closely monitoring the evolving US–China trade tensions and political developments in France. Notably, President Trump issued a threat of a cooking oil embargo on China after Beijing refused to increase its purchases of US soybeans. In France, political uncertainty has eased as the suspension of pension reforms has led the Socialist Party to dismiss the possibility of a no-confidence vote.