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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
BTP
BTPs are under increasing pressure amid hawkish ECB rhetoric and market pricing ahead of next week's meeting. Political risk ahead of the September 25 election, waning economic growth prospects, and soaring core EGB yields are also factors - but the withdrawal of ECB accommodation appears to be the key driver to watch.
- A 75bp hike is increasingly consensus for next week's ECB meeting, and cumulative pricing for this cycle continues to rise - bringing BTP yields higher with it.
- See chart below: March 2023 ESTR-implied rates are seen at 2.09%, up from 0.92% a month ago; BTP yields have risen more or less in tandem.
- Our tech analyst notes that Wednesday's move for BTP futures through key support at the Jul 21 low of 119.57 reinforces the current bearish cycle, and puts focus on the Jun 22 low at 118.60.
- It's not simply broader bond weakness pushing BTPs lower, as Italian debt is underperforming. The 10Y spread to Bunds hit a high of 241.5bp today (up 5+bp). While the spread has pulled back to flat on the session, the trend is still upward and the 250bp June high is in sight.
- Spreads above 250bp would augur a return to early pandemic (May 2020) levels; beyond that to the high 200s/low 300s seen amid previous political uncertainty in 2018-19.
ECB March 2023 Pricing And 10Y BTP Yield %Source: BBG, MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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