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Citi: Risk/Reward Favours Peripheral Spread Tighteners

EGBS

Citi write “BTP spreads have continued to decouple from ECB pricing. Any pushback from the ECB today on the current rate-cut pricing is unlikely to change this dynamic.”

  • “In contrast, if the market perceives the ECB pushback as weak, the periphery could benefit from further long setting before rate cuts start.”
  • “Overall, we think the risk/reward favours periphery tighteners from here. This view might find support from 1) our economists’ expectation that Italy’s QQ GDP growth might bottom in this quarter; 2) our updated forecasts for sovereign credit ratings, where we expect several rating upgrades for Portugal, Greece and Ireland in the near- and medium-term.”
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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