Italian BTP Yields Flat to Start the Week

Italy’s 10-year BTP yield eased toward 3.45%, its lowest level since late January, as markets evaluated the European Central Bank’s policy signals and turned their attention to upcoming macroeconomic releases, including the closely watched US employment and inflation data. At its latest meeting, the ECB left rates unchanged and reiterated that inflation is on track to return sustainably to its 2% medium-term goal. President Christine Lagarde maintained a composed stance, stating that the euro area’s inflation outlook remains in a “good place” and minimizing concerns over the euro’s recent strength. She also emphasized that potentially volatile data in the months ahead should not be used as the sole basis for policy decisions. Meanwhile, investors reacted to the announcement that Bank of France Governor François Villeroy de Galhau will step down on June 1, 2026, ahead of the originally scheduled end of his term in autumn 2027.

Italy’s 10-year BTP yield eased below 3.5% after the European Central Bank left interest rates unchanged, reaffirming that inflation is expected to converge toward its 2% target over the medium term. The ECB said the euro area economy remains resilient, while warning that the outlook remains uncertain amid global trade policy risks and ongoing geopolitical tensions. At the ECB press conference, President Lagarde reiterated that both the central bank and the euro area inflation outlook are in a “good place,” while cautioning that inflation readings may fluctuate in the months ahead amid higher uncertainty. On the data front, euro area headline inflation slowed to 1.7% in January, well below the ECB’s target, while core inflation unexpectedly eased to 2.2%, its lowest level since October 2021. In Italy, inflation also moderated to 1.0%, the weakest reading since October 2024, reinforcing concerns that a stronger euro could prompt a resumption of policy easing paused in June.

Italy’s 10-year BTP yield slipped further below 3.5% as markets reacted to weaker eurozone inflation data ahead of the European Central Bank's decision due Thursday. Eurozone CPI slowed to 1.7% in January, comfortably below the ECB’s target, while core inflation unexpectedly fell to 2.2%, its lowest since October 2021, raising concerns that a stronger euro could trigger a resumption of rate cuts paused in June. In Italy, inflation eased to 1.0%, the lowest level since October 2024. The ECB is widely expected to keep rates unchanged for a fifth consecutive meeting, with officials likely evaluating the deflationary impact of a stronger euro. ECB President Christine Lagarde is expected to reaffirm that monetary policy remains in a “good place,” while money markets anticipate rates will remain steady through 2026.