Italy's benchmark bond yield hit its lowest level in 15 months on Thursday as the bond market rally continued despite central bank officials' best attempts to rein in the exuberance.

The Italian 10-year yield, which moves inversely to the price, fell to 3.566% on Thursday, the lowest since late August 2022, and was last down 3 basis points (bps) at 3.579%. It is on track for its biggest monthly fall since 2013, at 65 bps.

Yields have tumbled in November and December as inflation in the U.S. and Europe has fallen sharply and central bankers have said interest rate hikes are almost certainly over.

Germany's 10-year bond yield, the benchmark for the euro zone as a whole, fell in early trading but was last little changed at 1.973%, just above Wednesday's nine-month low.

"It just seems like no one's been willing to stand in the way of this (rally) and you do wonder is that partly because it's year-end and no one really wants to get cut out," said Lyn Graham-Taylor, rates strategist at Rabobank.

"It's always difficult at this time of year reading too much into stuff, just because you do get these outsized moves based on thin liquidity."

Investors expect more than 150 bps worth of interest rate cuts from the ECB next year and a similar amount from the U.S. Federal Reserve, although officials have said markets are getting ahead of themselves.

Expectations for lower interest rates - and therefore government borrowing costs - have been a balm for Italy, which has a pile of public debt worth around 140% of gross domestic product.

Bond investors had some final reading before the holidays: the details of the European Union's agreement on fiscal rules, struck on Wednesday.

At the behest of Germany, the rules say countries should reduce debt each year and the old benchmark targets of a 60% debt-to-GDP ratio and 3% deficit remain in place.

Yet they are more lenient than those that were suspended before the pandemic and contain various caveats, with many countries' debts and deficits far above those levels.

The gap between Italy and Germany's 10-year bond yields was last at 159 bps. It fell to its lowest since late June on Wednesday at 157 bps.

Germany's two-year yield was last flat at 2.478%, not far from its lowest in nine months.

Numerous ECB officials have said investors are getting too giddy.

"Once we see inflation is clearly converging in a stable manner to our target of 2%, monetary policy might then start to ease. But it's still too early for that to happen," ECB Vice President Luis de Guindos told Spanish newspaper 20 Minutos in an interview published on Thursday.

Euro zone inflation fell to 2.4% in November but many economists think it is likely to tick up again to around 3%.

German central bank chief Joachim Nagel on Wednesday explicitly warned markets: "I would say to everyone who is speculating on an imminent interest rate cut: be careful, some people have already miscalculated that."

The economic calendar is light on Thursday, with a final reading of U.S. third-quarter GDP and U.S. weekly jobless claims due at 1330 GMT.

(Reporting by Harry Robertson Editing by Bernadette Baum)