Commerzbank Remain Wary On Spreads Around Ratings Updates, QTs, TLTRO Repayments

Commerzbank note that “Fitch's rating review of Italy will be in focus this evening. While the stable outlook of the BBB-rating appears to be at risk, not least after Fitch's negative rating action on France a couple of weeks ago, it seems more likely that Fitch skips the Italian review this week. More relevant in any case will be Moody's review next week, where any negative rating action would lead to a junk rating. Such rating concerns add to rising headwinds from €QT, TLTROs and the duration aversion of domestic banks. We therefore stay cautious on BTPs, looking for 10y spreads vs. Bunds to trade back above 200bp.”