/RATINGS: Risk Of Neg Outlook Action From Fitch After Hours, But Most See No Change

Fitch are scheduled to provide a sovereign rating update on Italy after hours (current rating: BBB; Outlook Stable).

• There are risks of a negative outlook move, but most do not expect such action later today.
• The 10-Year BTP/Bund spread sits just above multi-week tights, with BTP bulls unable to force a sustained move below 130bp on Thursday.
• Sell-side thoughts on the potential update from Fitch can be seen below.
• Citi: Our base case is for no change in Italy’s rating over coming months. The recent decline in debt/GDP ratio has pulled down the entire trajectory, GDP growth is likely to remain strong, and most importantly, the construction Superbonus has now been restricted. Overall, the risk and risk severity of a rating action looks small, keeping us constructive on BTP spreads vs other risk assets.
• Commerzbank: A negative outlook seems possible today, but we consider it more likely that the rating agency will wait until more clarity on the next budget emerges.
• UniCredit: We think that confirmation of the current assessment is the most likely outcome. Despite good news in terms of GDP growth and the decline in the public debt/GDP ratio, Fitch has recently highlighted the uncertainty related to the significantly larger-than-expected take-up of the Superbonus tax credit scheme in 2023.