06 February 2019 by jbchevrel
Not just in London, actually. The BTP market has been under some pressure over the past few sessions. Today the 10y BTP/Bund spread reached 270bp again. As that spread widened c30bp, the 5y sovereign CDS widened by c15bp. That comes even as today’s 30y syndication sounded successful. €8B sold vs €41B of bids. It seems like a strong bid-to-cover. It seems that many people have a clear idea how Italy will be like in 2049. Are these people non-resident (read: non-sticky ratings-driven investors)? May well be. Non-resident holdings had fallen to 30% in Q4 (a % seen last time in 1999). Then the strong foreign demand (64%) for the syndicated 15y in JAN shows appetite from non-domestics. On the fundamental side of things, the governments c1% growth target is everywhere but in the data. Technical recession in Q4 (GDP -0.2q +0.1y). Weak January activity indicators (47.8 mfg PMI 48.8 composite PMI). New car sales -7.6%y. Unsurprisingly, ANSA reported that the EU expects sub1% (0.2%y) growth in 2019. Adding to it, the IMF says there is no way Italy achieves 1% with the current policies.