Despite an increase in core inflation in the US, as measured by personal consumption expenditure, and with inflation approaching the 2% target level of the Federal Reserve, the US central bank maintained its path for increasing interest rates.
While market reaction remains muted, there was a small decrease on the shorter part of the US yield curve, while the longer part of the yield curve remained roughly unchanged. In short, there was a slight steepening of the curve. (The US yield curve measures the spread between short- and long-term debt issued by the US government.)
In Europe, the inability of a coalition government to be formed in Italy, has been announced by the winners of the last election. While new elections appear the only way to solve the issue and recent polls signal an increase of votes for populist movements, market reaction remains subdued. There was a less than 6 basis points increase in Italian government bond ten-year yields relative to the German Bund yield.
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