Race to the BTp Value, spreads down in the two previous placements

Does the BTp Value 'bring good luck' to the Italian spread? The history of placements of the government bond with rising coupons that will be offered to savers again starting next Monday would suggest so. On the occasion of the only two past issues, both dating back to last year in June and October, the yield differential between the BTp and ten-year Bunds has in fact always narrowed and the current situation seems to have all the makings of a revival of the old adage of 'there's no two without three'.

Ubs, for example, is convinced of this, and expects demand for the BTp Valore next week to be once again high and between EUR 15 and 17 billion, but above all a possible further contraction of the spread towards a level 'close to 140 basis points'. Last year, the two bonds of the same type were able to attract total demand of around EUR 35 billion and had in this way contributed, according to Emmanouil Karimalis, fixed income strategist at Ubs, to "alleviating the financing pressure on the Italian Treasury, which had to issue more conventional bonds to finance the revised budget deficits".

Reasoning specifically about the type of operation that the Mef is preparing to launch, Ubs points out that 'the stock of excess household savings in Italy is almost EUR 100 billion higher than pre-pandemic levels'. This element, together with the favourable tax treatment compared to other financial assets, would also 'continue to attract buyers' interest in this retail bond and support BTp spreads'.

The role of Italian households in holding domestic debt is, moreover, increasingly relevant in the new scenario of an ECB that has not only stopped buying securities on the market, but is also gradually reducing its portfolio by avoiding repurchasing part of those maturing at a time when fiscal deficits persist and must be refinanced in any case. "The development of an active retail channel is key to mitigating the shift in the sovereign debt investor base as monetary policy conditions change," confirms Alessandra Poli, an analyst in Scope Ratings' dedicated sovereign team, noting that "the interest rate environment remains attractive to retail investors and it is therefore crucial that the Treasury expands its bond issuance focused on them, in the presence of strong demand and limited competition from bank deposits."

The analysts' considerations extend specifically beyond the single episode related to the BTp Valore. Italian spreads 'still look cheap when compared to closely correlated risk factors such as the iTraxx Europe index' for securities with similar creditworthiness (BBB), Karimalis further notes, who on the other hand does not foresee 'any immediate political events in Italy that could increase pressure on BTp'.