/BTPS: 10-Year Spread Vs. Bunds Little Changed Ahead Of Potential Rating Update From Fitch

10-Year BTPs unwound their early widening vs. Bunds to sit back from the multi-week wides registered in recent sessions, last showing just below 190bp, little changed on the day.

• The sovereign credit rating situation is front and centre for BTPS, and some jitters surrounding the matter may have contributed to the early widening, alongside broader risk-positive price action (which has since moderated).
• ECB QT & banking sector TLTRO repayment worries exacerbate stress on the ratings front, although general energy price moderations are a positive for Italian growth. The lack of firm delivery of the country’s Recovery and Resilience Plan adds another question to the mix.
• Next Friday’s potential update from Moody’s will likely garner more interest than today’s potential offering from Fitch (although action from Fitch cannot be ruled out).
• Moody’s already have Italy on a negative outlook, as opposed to the stable outlook at Fitch, while Italy is only one notch above junk at Moody’s vs. two notches above at Fitch.
• A reminder that our policy team recently interviewed the Italian Treasury’s Director General of Public Debt, who noted that the Treasury is “quite confident” after a “very constructive dialogue” with ratings agencies, although views on the sell-side re: the situation are a little more mixed.