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Spread: for S&P there are no risks in view of the new president of the republic


The political difficulties linked to the election of the next president of the republic do not seem to worry economists too much despite the recent rise in the spread BTP / Bund at 130 points, the highest since Prime Minister Mario Draghi took office.

I don’t see a big increase in the spread in view of the presidential elections in Italy of 24 January, I think that the differential will remain more or less at current levels ”is what was said this morning by Sylvain Broyer, chief economist for Europe at S&P Global Ratings, during a press conference on Italy’s prospects.

The widening of the spread seen since last October, according to the economist, is more due to the expectations of a downsizing of the purchases of government bonds by the ECB.

For Broyer, one of Rome’s priorities is “not to jeopardize the current strong confidence of businesses and families”. According to S&P estimates, the Italian economy should grow by 4.7% in 2022 after a 6.4% jump in 2021, and then slow down further in 2023 to 1.8%.

As for the possible evolution of the political framework in the short term in Italy, the expert then highlighted that “our basic hypothesis is that there is not a great incentive to go to early elections, we are quite confident in a situation of continuity “.

Spread, Mario Draghi and Goldman Sachs

The spread expectations formulated by Goldman Sachs. In a note released in recent days, the analysts of the US bank pointed out instead that, historically, periods of political stress can see an under-performance of 15-20 basis points of the Italian spread and that therefore the yield differential between the share Italian state with a maturity of ten years and the German counterpart it can rise to 150 basis points.

“We expect that several headwinds in the first quarter will create a difficult environment for sovereign spreads – reads a note from the US bank – given the reduced support of QE and the increase in issuance, we believe that the widening of the BTP-bund observed in the last week may extend ”. “In addition to less favorable supply dynamics, it is likely that the political risk for BTPs will increase until the first round of the Italian presidential elections on January 24,” he added.

Self Mario Draghi were to move from Palazzo Chigi to the Quirinale there would likely be “a loss of political continuity and a potential delay in the implementation of the Recovery Fund’s investments” and therefore an expansion of pressure on BTP-bund spreads to reflect these risks.

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