/RATINGS: No Real Expectation For Change From S&P Later today

The recent deterioration of the Italian budget has increased focused on today’s scheduled sovereign rating update of Italy from S&P (current rating: BBB; Outlook Stable). Some sell-side views on the potential update are outlined below:

• Citi: We see the risk of any adverse rating action on Italy as limited over coming months given improving economic growth prospects (which is the key determinant in debt sustainability analysis), a likely declining cost of funding as ECB rate cuts approach, and, most importantly, Italian government finally curtailing the construction ‘superbonus’ scheme.
• Commerzbank: While anything but a confirmation of rating and outlook would be a surprise, it will be intriguing to read between the lines of the report ahead of the more delicate rating reviews for France over the coming weeks.
• UniCredit: S&P is likely to wait for the medium-term fiscal-structural plan to be presented by the Italian government in the summer (before making any adjustments). As a supportive factor for debt, the rating agency is likely to take note of the lower implicit cost of public debt, and thus interest expenditure, projected by the government over the forecast horizon, compared to last September.