UniCredit On Peripheral Outperformance In Early '24

UniCredit write “peripherals have performed well this week, with the 10Y SPGB-Bund spread tightening to its lowest level since April 2022.”

• “Spanish govies have also outperformed French paper, with the 10Y spread trading the tightest level since October 2021.”
• “The fact that core and semi-core curves are inverted or flat in most segments is pushing investors towards peripheral curves, which offer better carry profiles.”
• “This is happening despite recent upward corrections in eurozone yields.”
• “Appetite for peripheral paper is also confirmed on the primary market.”
• “This is an encouraging start to 2024 for Italian and Spanish paper in light of the uncertain economic outlook and the fact that the ECB will start reducing its PEPP portfolio from 2H24.”