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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
No surprise to see the recovery in broader risk appetite being accompanied by some modest tightening in the BTP/Bund spread and a dip in EUR 3m10Y vol.
- Broader macro sentiment will be key for the spread in the immediate term, with any renewed hard landing worry set to provide a spread widening impulse, while any tilt towards a soft landing outcome would facilitate further spread narrowing.
- On that front, Citi’s fair value fundamental model suggests that the BTP/Bund spread should be trading at 165bp, although they note that overarching risk sentiment has pushed the spread below "fair" levels for much of ’24.
- Elsewhere, cash flows will be supportive of BTPs in the immediate term, with the usual Italian summer supply hiatus underway (no BTP issuance until August 29). Next week will see the redemption of just over EUR14bn of an old 20-Year BTP.
Fig. 1: 10-Year BTP/Bund Spread Vs. EUR 3m10y Volatility
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
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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