The Btp Italia show starts. Retail orders amounting to 3.2 billion euros on the first day of placement

Sprint start for the eighteenth issue of Btp Italia. The placement began on Monday, November 14 in the morning and made it possible to collect nearly 3.2 billion (3.184 billion to be precise), for more than 103 thousand contracts closed during the first of the three days dedicated to individual investors. The offer will continue until Wednesday, November 16 for retail investors, unless closed early. The window for institutional investors is only open from 10 a.m. to 12 p.m. on Thursday, November 17.

Guaranteed minimum coupon of 1.6%.

The bond, dating from November 2028, guarantees a minimum coupon of 1.6%, identical to that of the last issue which saw interest amount to 9.45 billion euros, including 7.27 billion for individuals, over an eight-year period. The launch of Btp Italia comes in a week that promises to be intense for issuance in the euro zone, with around 20 billion of bonds offered at auction and the EU which is preparing a syndication, underlined the experts of ‘UnicreditResearch.

Unicredit Research believes that the latest increase in business credit is not justified.

Amid a strong rally in European equities and following better-than-expected US inflation data, the past week has seen a notable tightening in European corporate credit spreads, with high yields contracting 35 bps to 405 bps, a level not seen since last June, and hybrids contracting 20 bps to 283 bps, a level not seen since last September, experts at Unicredit Research noted. However, they warned that “we believe the risks to economic growth remain high going forward. Furthermore, the hawkish tone of ECB policymakers continues to dominate. Overall, we believe the latest rally in corporate credit is unwarranted and we see an upward correction in spreads in the coming days’.

Panetta (ECB): aggressive rate tightening is not justifiable

This morning, Fabio Panetta, Member of the Governing Council of the ECB, speaking at a conference entitled “Finding the Gap” in Florence, underlined that inflation is currently high and that the risks associated with this situation do not should not be underestimated. “Monetary policy needs to be tightened to prevent inflation from taking hold,” he said, adding, however, that “given the progress already made in adjusting our policy stance, aggressive tightening will not is not recommended”. The impact of current shocks on the output gap is “clearly uncertain”, Mr Panetta continued, and “it would be misleading to base aggressive tightening on assumptions that cannot be conclusively supported”. The consequences of any errors might not be noticeable today, but would become apparent over time. So it may be too late to reverse them completely.”

ECB experts’ projections published in September, which call for inflation close to 2% at the end of the forecast horizon, are compatible with a withdrawal of monetary policy accommodation. “But the uncertainty surrounding supply and demand dynamics forces us to remain cautious about the scope of the adjustment. And it should not be ignored that the tightening, which results from our decisions since the end of 2021 and anticipations of further adjustments to our position, is already making its way into the economy, with the usual transmission delays.” Estimates, Mr. Panetta concluded, “suggest that this tightening will on average subtract more than one percentage point from annual real GDP growth each year through 2024 compared to a scenario in which interest rates and balance sheet forecasts would have remained unchanged since December 2021”. Already on November 1, the Spanish adviser, Pablo Hernandez de Cos, declared that the ECB was not obliged to launch another rate hike of 75 basis points at the December meeting. “The fact that we raised rates by 75 basis points… doesn’t mean that will be the future design, it will depend on the data,” de Cos explained. On Thursday 17, the key Eurozone endline inflation figure for October (preliminary: 1.5% m/m; 10.7% m/y; consensus: 1.4% m/m; 10.7% year-on-year).

Decline in 10-year Btp spreads and yields awaiting Fitch’s opinion on Italy

Today’s session, November 14, was a settlement session in the European bond market. The 10-year Bund yield fell to 2.098% and the 10-year Btp yield to 4.15%, with the Btp/Bund spread falling to 205 basis points. On Friday, November 18, the rating agency Fitch gave its opinion on Italy’s sovereign rating, currently BBB with a stable outlook. Last Friday, after markets closed, Moody’s issued a credit advisory on Italy, in which it spoke of a better than expected economic performance in 2022 – 3.7% the estimate against 2.7% the previous one – linked, however, to the unknown energy supply. Regarding the rating outlook – currently Baa3 with a negative outlook since August – a sovereign credit rating downgrade would occur in the event of a significant weakening of the medium-term growth outlook, also due to the failure possible implementation of the reforms described in the NRP. Risks to the rating would also come, according to Moody’s, from a sharp rise in borrowing costs and an overly flexible fiscal policy. ()

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