Citi Flag Potential For Tactical Outperformance Window

Citi note that “10-Year BTP-Bund tightened by around 3bp following Friday’s decision by Fitch to keep the BBB stable rating unchanged (~188bp as of close). Still, the spread is near the top end of the 180-188bp range within which it has closed on 75% of the sessions since mid-January. Ahead, the next risk event for BTPs is the Moody’s review this Friday, with the current rating on the lowest IG-tier and a negative outlook. However, we do not expect Moody’s to change the rating or the outlook. In addition, there is little BTP supply for the next two weeks (apart from short-term and BTPei auctions next week) in contrast to the other three big issuers. We also do not expect any BTP syndication in May. Net, this could be a window of tactical outperformance of BTP spreads towards the 180bp mark in our view.”