The ECB brings down Piazza Affari but higher rates help the banks
At the start of the session, Piazza Affari and the other European stock exchanges retreat. EuroStoxx50 index loses 1%. Ftse Mib -0.8%. The tightening of the central banks could last for a long time as Isabel Schnabel, the German hawk in the ECB management, repeated this morning. “There is the risk that the markets underestimate inflation – he said in an interview-. “We are still far from being able to claim victory”.
The economy’s reaction to interest rate hikes may turn out to be weaker than previously, and if that transpires, “we may have to act more forcefully.” There are not only negative effects. The promotion of Kbw pushes the banks to start with Banco Bpm and Bpe. The driving force is the rise in interest rates which will raise the intermediation margin and the boom yields of the Btp. Recordati drops after the rejection of Barclays and Equita.
BTP
The novelty of the day is represented by the interest in BTPs. The 10-year yield recovered to 4.32%, approaching the levels of the end of 2022 (4.68%). In terms of price, the week has a negative balance of 1.5%, which reduces the year-to-date gain to a modest +1%. In mid-January, the gain was around +8%.
Yesterday evening the Treasury disclosed the details of the 5 billion 30-year BTP issue, with an annual coupon of 4.5%. Just under 200 investors took part in the operation for a request of 26.5 billion. The largest share was subscribed by the banks (40.4%). The funds underwrote 24%. Investors with a long-term investment horizon bought a significant share of the issue equal to 28.7% (in particular 10.5% went to pension funds and insurance companies, 18.2% was allocated to institutions governmental). 6.5% went to hedge funds. A residual share of 0.4% was subscribed by non-financial companies.
Foreign investors at the forefront
Foreign investors bought most of the issue (57.3%), while domestic investors subscribed 42.7%. Among foreign investors, the largest share of the placement, around 53%, was subscribed by European investors, coming in particular from the United Kingdom (17.7%), Germany, Austria and Switzerland (9.6%), peninsula Iberian (7.2%), Scandinavian countries (6.1%), France (5.9%), Greece (5.2%), Benelux (1.3%). Under these conditions, yields above 4% can be systematically exploited to build a position on BTPs over the long term.