/RATINGS: Sell Side Thoughts Ahead Of S&P’s Sovereign Review Of Italy

Sell side thoughts on S&P's sovereign credit rating review of Italy (current rating: BBB; Outlook Negative), scheduled for release after hours today.

• Commerzbank: We exp. S&P to stay put. S&P has notably lagged Moody's & Fitch after lowering Italy's outlook to -ve two years ago. Gov't projections for the '21 deficit & debt ratio do not show the steep decline anticipated prev. S&P itself has been outspoken on the impact of the NGEU agreement, considering it "a key step toward a fiscal union" and the EU's spectacular debut issuance this week should add conviction.
• Danske Bank: We do not expect that a downgrade despite the sig. rise in debt/GDP on the back of COVID. There will be focus on the support from the EU through the recovery fund & SURE, as well as historical low funding costs for Italy.
• Unicredit: We exp. no rating change. Italy's borrowing conditions have continued to improve, which is exp. to mitigate potential risks to public finance sustainability. The ECB has played a key role & it is likely to continue to provide a backstop for additional public borrowing. S&P is likely to highlight that NGEU might mitigate the risk of a weakening of Italy's medium-term growth. Other indicators will also feature e.g. the favourable net-external-creditor position & low levels of private debt.