Considering difficult to find Inflation Linked Swaps data to understand the EuroArea 5y5y breakeven inflation rate. In the chart below you got: a 5y BTP yield of 3.29%, a 10y BTP yield of 4.02%. Also, 5y BTP Inflation index linked yield 0.65%, and 10y BTP inflation index linked yield 0.1%.
theoretically, Italy’s 5y5y breakeven inflation rate would be 2.63%, while the 10y10y breakeven inflation will be 4%. There seems to be mispricing in BTP markets. The important data, it’s the 2.6% 5y breakeven Inflation rate projection,
the ECB will find it very difficult from an inflation and price stability standpoint to decide how to implement monetary policy, the hiking path would be forced to be above the 2.0% ECB interest rate, that financial institutions have priced in.