The winds of crisis that are shaking the government majority have offered investors the pretext to sell BTp and this explains the rise of today’s BTp-Bund spread. These are mostly profit taking which do not seem to affect the rally scored in recent weeks by the Italian debt. A movement that culminated yesterday when the differential dropped to 125 points (minimum since May 7, 2018). That the market is hungry for BTp at this stage is demonstrated by the 15-year BTp exploit which on Tuesday’s union placement registered a request equal to more than 5 times the amount placed. Or even the boom in demand at 3 and 7-year BTp auctions yesterday which saw the Treasury return to refinance to negative returns on the three-year maturity as had not happened since September.

Behind the exploit of Italian securities there are two factors: the lower perception of political risk and the general market context created with the Coronavirus emergency which played in favor of all fixed income.

The effect of voting in Emilia
On the first front, the key event was the elections in Emilia Romagna on 26 January. The outcome of the vote, which favored the holding of the majority of the government, pushed aside the prospect of early elections and the investors, notoriously allergic to uncertainty, bet strongly on the BTp: before the vote, the ten-year stock showed a rate of 1.22% with the spread at 155, yesterday at the close of trading the rate was traveling at 0.91% with the differential that closed at 128 points.