FX.co ★ Italian 10Y Bond Yield Falls to Fresh 1-Month Low

Italy's 10-year government bond yield declined to approximately 3.77%, marking its lowest point since March 4. This movement reflects increased investor anticipation of interest rate reductions by the European Central Bank, spurred by concerns that an intensifying trade conflict could negatively impact global economic growth. U.S. President Trump announced a baseline 10% tariff on all imports into the United States, coupled with increased tariffs on significant trading partners, including a 20% duty on imports from the European Union, slated to begin on April 9. Consequently, money markets have factored in a probability exceeding 90% for a 25 basis point rate cut from the ECB in April, a rise from the roughly 80% probability noted the previous day. Projections suggest the deposit rate may fall to 1.8% by December, down from the current expectation of 1.9%. Concurrently, investors have been scrutinizing critical economic indicators. Preliminary Consumer Price Index data reveal that Italy's inflation hit a 1.5-year peak at 2.0% in March, whereas the broader Eurozone's inflation rate decreased to 2.2%, the lowest since November 2024. Additionally, reports indicated that Italy's manufacturing sector continues to experience deep contraction, while growth in the service sector failed to meet expectations.