Anne Karina Asbjorn at Nomura looks at the.....>

BTPS: Anne Karina Asbjorn at Nomura looks at the heavy selling of BTPs by the

banking sector in May and June.

- Nomura point out that this could be temporary ahead of the taper or it could

follow the more strategic selling of Spanish debt seen in recent years. If the

move is a strategic one, then "the impact upon BTPs could be significant".

- Asbjorn notes how sensitive FI and non-resident flows are to yield levels. The

ECB asset purchase programme is yield insensitive and so as the ECB steps back,

"the market clearing yield is almost certain to be higher".

- Despite ECB redemptions playing a bigger role in the APP "In the context of

monetary policy tightening and Italy's general election in 2018 approaching we

think the 10yr BTP could go ~30bp higher in the medium term".