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Why BTPs are more vulnerable than GGBs to tapering expectations

EGBS
  • We have had a few questions this morning about why BTPs would be more vulnerable to tapering expectations than GGBs (10-year BTP yields are 3.3bp higher than 10-year GGB yields at the time of writing and spreads have widened over a basis point today).
  • We think that the main reason is down to the relative supply outlook for the remainder of the fiscal year.
  • Italy is due to sell another E150-200bln of BTPs this year. This money will help pay for Draghi's new stimulus plans as well as funding the primary deficit and interest payments.
  • Greece has completed its funding requirements for 2021, and only really needs to issue more if it wants to repay more IMF funding. This is relatively expensive but is dependent upon market conditions being favourable so is a nice to have rather than must have funding.
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