Timid purchases on Italian government bonds are back. In the last part of today’s session, the Italian secondary debt market saw a return of confidence from operators. The 10-year yield thus fell to the lows of the last two weeks, reaching 3.30%. The spread is moving in the area of 242 basis points from yesterday’s 245.
Purchases also spread over US and German bonds. The macro data arrived from the USA moved the operators with the growth of the country’s GDP which in the second quarter highlighted an unexpected technical recession. Surprisingly, the annualized GDP of the world‘s leading economy decreased by 0.9%, from -1.6% in the previous quarter. Analysts had expected a 0.4% increase.
The difficulties of the US economy give hope that the Fed, the US central bank, will be able to proceed more gradually in the current monetary tightening.
Meanwhile, last night, the Fed announced as expected a new tightening of three-quarters of a percentage point which aims to block the price run. However, it has been vague on the continuation of the monetary tightening path. “The lack of clear future guidance leaves some uncertainty in the markets, so we should see more volatility in the near term,” commented Jason England, Janus Henderson’s global bond portfolio manager. The initial reaction of the risk (equity / credit) and interest rate markets is positive, as they believe the Fed is now more credible in its campaign to fight inflation. Over the medium term, if the Fed continues to hike rates to a tight level, it can push the economy into a recession as we continue to see signs of a slowdown, which would be bad for risk markets and good for financial markets. taxi”.
The anti-spread shield
The words of Ignazio Visco on the anti-spread shield also affected the performance of today’s BTPs. The governor of the Bank of Italy said that “the European Central Bank must see signs of” panic “on the bond markets to activate the new debt purchase program designed by the anti-fragmentation mechanism presented last week”.
“This gap and the way it has developed, at least for the moment, do not correspond to significant instability or to something disordered,” Visco said. This is crucial: if tomorrow we start seeing 250, 255, 260 and so on – something that (indicates that) there is panic in the market, we take action and kill the market. “