Yield gap between Italian and German bonds hits 26-month low

The gap between Italian and German yields hit a 26-month low on Wednesday while the euro area's bond prices edged higher after falling the day before, with markets still betting on 95 basis points of European Central Bank rate cuts in 2024. Since the ECB policy meeting last week, investors have assumed that the central bank will keep rates at the current levels until June and will gradually cut after that point. Yields on both sides of the Atlantic rose on Tuesday after U.S. inflation figures came in slightly above expectations, raising concerns that the Federal Reserve may not be able to cut interest rates as soon as investors expect.