Estimated reading time: 5 minutes
by Lorenzo Raffo
The indications coming from the trend of the prices are unequivocal: our government bonds move between the continuation of the phase of weakness, which has characterized them for weeks, and attempts to re-accelerate. The success of the BTP Italia 2025, already very lively on the secondary market, and the approval in the EU of the “recovery fund”, which attributes 172.7 billion euros to Italy, still represent pushes for re-accumulation, albeit in small steps. Let’s see what technical analysis designates.
That “cup with the handle”
The 10-year yield returned apparently stable below 1.6%, an important barrier in outlining the bullish or bearish phases, logically opposite to those of prices. Since the beginning of April, the yield had jumped above this level but for some days there has been a drop towards 1.5%, the closing figure yesterday, in the presence – more importantly – of a reduction in intraday volatility, which remains below 100 pb of difference between minimum and maximum. Just the compression of the oscillations within the single sessions is the element that most characterizes the market trends. Futures testify to this. The long term in the last seven days has started a slow but progressive recovery with a variation between “high” and “low” from start to end of trading contained within 1%. Meanwhile, a “cup and handle” technical pattern is determined, which usually anticipates a take-off of the prices. The purists of the technical analysis may object that some values of the figure are anomalous but in the context of the normal course there is no longer anything even in the conformation of the graphs. Equally important is the break yesterday of a bearish trendline that emerged from September last year, while a fierce battle with the 200 period moving average is announced: it stands at 143.8 against the closing price of the session at 142.18. If the positive trend continues its breakout could occur in the coming days. Instead, contact has already taken place for the Future short term – referred to short deadlines – which just yesterday approached the longest of the technical indicators of the period.
From 2067 to 2024
The individual titles show quite similar movements, although in their case we can speak in many cases of a V-shape with the fastest ascending part however the descending one. This is confirmed by the 2.8% BTP 2067 (Isin IT0005217390), which is recovering volumes and is graphically set to face the comparison with the average at 200, placed at 109.3 compared to the closing figure yesterday at 106.8. Similar situation for 3.25% 2046 (Isin IT0005083057) and for 1.35% 2030 (Isin IT0005383309), while shortening the deadlines the distance from the moving average to 200 tends to widen somewhat, although the momentum indicators are always favorable. This is confirmed by 1.85% 2024 (Isin IT0005246340), which must first pass a hot zone of 104.25 against the conclusion of the session at 104.12 and with m.m. 200 placed at 105.5. In all cases, the important Super Trend oscillator started on the positive side but in the next few days the BTPs under eight years of duration will face quite significant resistance.
Curve with two hunchbacks
Finally, the analysis of the “yield curve” characterized by two small bumps at the age of 5 and 15, although tendentially regular and better set than a year ago, is inevitable. The global landscape therefore appears to be normalizing, although the ten-year yield is still high, which leaves margins for those wishing to exploit the moment for short-medium term tactical positions on our government bonds. For long ones, however, it will be necessary to “resent” in a few months.