/RATINGS/BTPS: Commerzbank Don’t Expect Italy To Lose IG Status In Medium-Term

Commerzbank note that “BTPs are showing no signs of rating anxiety heading into today's Fitch review with spreads vs. 10y Bunds trading at the tightest level in more than a month in sync with the overall duration recovery.”

• “Longer-term, prospects about a more generous ECB operational framework would help. In this respect, it is noteworthy that ECB Chief Economist Lane, speaking at this week's Money Market Conference, emphasised the benefits of sufficient reserves, mentioning that in a steady state these can be provided through a "mix of a structural bond portfolio and short-term and longer-term refinancing operations."
• “Fitch affirmed its BBB/stable rating in May, which was before the budgetary plans for 2024 were published by the Italian government. Early October, Fitch stated that Italy's future deficit plans "represent a significant loosening of fiscal policy". While Fitch's slightly more optimistic assumption about Italy's trend growth could be supportive, we see a modest risk for a negative rating outlook. This would constitute a catch up with Moody's whose review is due next week.”
• “That being said, we expect rating agencies to give €-sovereigns the benefit of the doubt in absence of domestic political shocks, i.e. we don't expect BTPs to lose their IG rating next year.”