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ITALY: A REPOST from yesterday, in case missed.
MOODY rating on Italy due circa 21.30BST/16.30ET Moody's currently rates Italy
at Baa3 stable (the bottom notch of investment grade). This follows up the after
hours decision by Fitch on April 28 to downgrade Italy to BBB- stable and S&P's
decision on April 24 to affirm Italy's BBB negative rating.
- A downgrade would be significant for BTPs and European bond markets. The first
round affect would be through some tracker funds that use Moody's ratings alone
or funds who have mandates not to hold bonds below IG grade from Moody's.
However, the bigger effect would be the concern that Moody's may not be the only
ratings agency to downgrade Italy. Active investors may start to accelerate
sales of BTPs to front run any further forced sales. This would drive the euro
weaker with at least some of the funds moved overseas. However, it would not
affect ECB purchases through the PEPP or collateral (due to the grandfathering
of ratings to pre-Covid levels).
- For BTP futures our technical analyst, Taso Anastasiou, sees key resistance at
139.77 with near-term support at 135.43 and the bear trigger at 132.61