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2025-12-17 19:25:32
[Eurozone Markets Reduce Bets on Rate Hikes; Italian-German Bond Spread Hits 16-Year Low] ⑴ Eurozone bond yields fell ahead of Thursday's ECB meeting as markets reduced their bets on future rate hikes, with the impact of Governing Council member Schnabel's hawkish comments fading. ⑵ Money market pricing indicates that the market's perception of a rate hike by March 2027 has fallen from over 50% to around 35%, reflecting a significant correction in market expectations. ⑶ Analysts believe that Schnabel's stance may not represent a broad consensus within the ECB, and a strong euro and external trade policies could inject deflationary pressures into the Eurozone, pushing the central bank to a more dovish stance. ⑷ An unexpected decline in German business confidence and doubts about the actual effectiveness of German fiscal stimulus have weakened expectations of economic overheating and tightening policies, providing support for the bond market. ⑸ The spread between Italian and German 10-year bond yields narrowed to approximately 65 basis points, hitting a 16-year low, indicating a continued improvement in market risk appetite for bonds from peripheral Eurozone countries.
