At the end of the year, the BTP-Bund spread showed a decisive widening in the wake of upward surprises on inflation which led operators to expect a less accommodative attitude …
At the end of the year, the BTP-Bund spread showed a decisive widening in the wake of upward surprises on inflation which led operators to expect a less accommodative attitude from the main central banks. Today the differential between the BTP and the Bund moves above 137 points and brings us closer to the threshold of 140 points, the highest since November 2020.
Le stime di Mps Capital Services
What will happen in 2022? Mps Capital Service analysts estimate it according to which, despite the Central European Bacana (ECB) members having repeatedly reported that a rate hike in 2022 is unlikely, the market continues to price in a rise of around 15 basis points. Of course, given the forward guidance, a rate hike would imply the end of QE and this explains why the recent spread movement.
“We believe that the action and communication of the ECB should contribute to maintaining the spread in the first part of the year around the current values (130 basis points + or – 10 points)”, say the analysts of Mps Capital Service . Subsequently, in the second half of the year, upward pressures should increase in light of: 1) the risk of lower liquidity linked to a possible early repayment of the TLTROs in June; 3) less support for ECB purchases especially in the second half of the year; 3) repricing of political risk in view of the 2023 political elections.
In this context, the 10-year BTP rate should follow the trend of the Bund rate described above with a variable spread between 130 and 170 bps.
Gross emissions of 350 billion
In terms of gross issues in 2022, in Italy they should amount to around 305 billion euros, a slight decrease compared to around 315 billion made this year. The amount is still quite high compared to the pre-crisis average, as the maturity profile in the coming years will be modeled by the record emissions made in 2020 to deal with the Covid emergency (228 billion will expire in 2022, 253 in 2023)
As seen previously, the ECB purchases should not fully cover the net emissions of 2022 (€ 13 billion of net emissions after ECB purchases) as they did in 2021 (-43 billion). At the single quarter level, the first will be the one in which there should be the greatest imbalance between supply and demand. Despite, in fact, the presence of Pepp, the low amount of maturities present in the first quarter will translate into positive net issues, according to our estimates, around 30 billion. The third quarter, on the other hand, should be the most favorable.
In summary, the experts conclude, the Treasury should continue in 2022 with a flexible management policy of emissions thanks also to the approximately 66 billion of liquidity available at the end of November 2021. In light of the high maturities for 2023, it is also reasonable to expect new buyback and exchange operations aimed at ‘smoothing’ the maturity profile.