Home » Inflation eclipses the Draghi effect: savings of over 2 billion fade with the rise in yields

Inflation eclipses the Draghi effect: savings of over 2 billion fade with the rise in yields

by admin

MILANO – At the beginning of February, with the Draghi government in gestation, the spread between German BTPs and Bunds was pushed below 100 basis points from the prospect that the former governor of the European Central Bank – a person of utmost confidence in the financial markets – would take the reins of the country in hand. At the first cry of the large majority executive, the differential broke 90 points and for many observers – with a recipe of concrete initiatives to get out of the crisis and a quick and effective writing of the plan for our Recovery fund – it could have been achieved Spain.

In reality, in recent months things have gone differently, so much so that now the yield gap between the Italian ten-year and the German counterpart has widened and stands just below 120 basis points, while the yield of the Italian stock has returned to above. ‘1%. Madrid, on the other hand, remained in a range between 65 and 70 points behind Berlin.

The rise in sovereign yields is certainly not an Italian peculiarity but a movement common to the whole globe and originating in the United States, where the prospect of a return of inflation has led the market to discount an action by the Fed on rates resulting in the start of tightening of ultra-accommodative monetary policy. The long wave also reached the eastern side of the Atlantic and the ten-year Bund yield also returned to positive ground.

Although, it should be clarified, there are no particular alarm signals towards Italy – but on the contrary, it is underlined by many parts that the situation remains favorable for public finances – compared to the premises of the early days of the Draghi government, the situation has developed differently . “On short-term rates, up to one year, we are seeing little movement, while the rise in medium-long rates is more evident”, explains Antonio Forte, researcher at CER.

See also  Stock market losses: These stocks lost the most

What does this new scenario, at nominal level, mean for interest spending? Assuming that 2021 continues with a second semester at current rates (around 1% on average for the long term and -0.5% for short-term ones) and imagining a step in 2022 that moves ten-year rates to 1 , 35% on an annual average and short-term ones at -0.25%, compared to the February-March scenario, the interest expenditure calculated by the CER would be higher by 800 million this year and between 2 and 2.5 billion on next one.

A “lack of savings”, therefore, compared to what was hypothesized thanks to the Draghi effect. But a level of spending that does not mess up the government’s plans, given that it remains in line with the forecasts of the April Def, which had remained cautious from this point of view. A signal, however, that probably the push that can be received from the markets has reached its limit and now it is up to Italy, and to the effectiveness of the NRP, to fire the decisive cartridges for the recovery.

.

You may also like

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy