BTP spread back on the line of fire


Yesterday's sharp widening in the 10-yr BTP/Bund spread will put the focus back on 300bps.

Today's pullback in BTP yields may be more due to pre-weekend positioning and more speculation over an early election, and doesn't change the bigger picture of rapidly deteriorating risk sentiment. Unless that improves markedly, the widest levels above 325bps from October will also eventually come under threat in 1Q. Our Partner Economist, Lorenzo Codogno, long anticipated this since the last year. We have, anche keep a short positioning in the 10 years Italian BTP.

As a broad and long term indication for the GDP growth patterns, I attract your attention on this updated chart of mine. Starting 1998, Italy's GDP start diverging from the rest of Europe. Then in 2001 the divergence increase. I remind you that Euro was adopted in 2002.

As of today, the GDP has not yet reached the pre-financial crisis levels.

Our projections for the trajectory of the Debt/GDP ratio are way more conservative than those of the Italian Government.


A the same time and coherently, the 5years CDS has been steadily growing since 2014. The global economy slow down will not help.


Italy's 5years CDS trend since 2014









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