Strong sales on BTPs this morning with spreads widening to a maximum of over two years. Investors show caution on Italian government bonds after the right-wing coalition’s electoral victory.
The BTP-Bund spread hit a peak of 250bp this morning, a level it hadn’t touched since May 2020 (Bloomberg data). The 10-year BTP yield went up to 4.62%, on the highest at around 9 years.
The political elections of 25 September gave a solid majority to the center-right coalition and Giorgia Meloni should be the next prime minister. Last night S&P Global Ratings he highlighted the limits of Italy, which has a “limited” budgetary room for maneuver, in view of the budget law that will have to be passed within the next few weeks, after the executive has been formed.
Always yesterday Christine Lagarde, number one of the ECB, have reinforced expectations of further rate hikes, considered by the central bank as necessary to beat inflation. “We plan to raise interest rates further at upcoming (Governing Council) meetings to bring demand down and prevent the risk of a persistent upward shift in inflation expectations,” Lagarde said at a hearing in the European Parliament’s Economic Committee.