Does the spread between BTp and Bund go up? Here are the three reasons for the reversal


Servicegovernment bonds

Not only the policy: behind the spread of the spread there are also two good news, which have become boomerangs for the BTp.

of Morya Longo

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3 'of reading

And yet it moves. It seemed like a forgotten problem, past water. But the spread between the BTp and the Bund is returning to be talked about: from the lows touched in mid-September to 132 basis points, on Wednesday 13 the risk thermometer Italy is in fact returned to exceed 165 basis points according to Reuters and the 154 according to Bloomberg ( the difference is due to the fact that from 7 October Reuters started to calculate the spread on the new 10-year BTp). And also the BTp auctions on Wednesday 13, with yields higher than a month ago, confirm that the risk-Italy has started to rise again. There are three reasons: one linked to Italian politics, one due to the opening of Germany to the single guarantee on bank deposits, one perhaps connected to a technicality introduced by the ECB.


The weight of politics

If the spread had fallen a lot with the formation of the new Government Count, now that the Government appears weaker, the pressure on our BTp is increasing. This is not because the Conte two particularly likes the markets for its policies. The reason is another: the Government of Conte two has completely abandoned the no-euro rhetoric. This is enough to reassure investors, terrified by the idea that the BTp that they bought in euros could one day be converted into devalued lira. This is why the weakness of the Government weighs on the spread: because in the case of early elections it is clear that the center-right will be won by the Northern League. And the League is still perceived as a non-euro party.

Perhaps wrongly. A Citigroup report of November 11th underlines that Salvini, when he replied "why not?" To the hypothesis of Mario Draghi as president of the Republic, helped to shake off the image of the non-euro party. But equally the market remains fearful. And Citigroup itself believes that the risk is underestimated in the markets. It is no coincidence that on 28 October, the day after the super-victory of the Center in the elections in Umbria, the spread has risen. And with the same perspective the Ilva case is looked at: because it weakens the Government.

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