LIBOR-OIS Spread between March19 - December19 ((FFN2019-QEDM2019)-(FFF2020-QEDZ2019))*100
DOUBLE TREASURY FUTURES BUTTERFLYE +14 * ZT - 37 * ZF + 23 * ZN - 5 * TN
BTPs will continue to remain under pressure as the EU has rejected Italy's budget proposal and Draghi has also issued a warning. Italian spreads are soaring and bonds will come under intense scrutiny.
The Italian Government sent the aggressive budget proposal to Brussels, with Finance Minister Tria suggesting he can "explain" things to EU counterparties and receive acceptance. Market participants know it's a long shot, and BTPs should come under more pressure.
Italy continued to be a sticking point for European policymakers. Salvini and DiMaio are not collaborating and want a higher budget deficit for 2019 than the EU will allow. Deadline is October 15th.
Italy's populist government kept some of it's promises and delivered a hefty budget for 2019 ata deficit of 2.4%. Markets are pricing in more of a conflict between Italy and Brussels. THis move down has quite a ways to go.
Clash between EU and Italy becoming more evident as Italy Rating Outlook Cut by Fitch on Possible Fiscal Loosening but "Italians come before ratings agencies" deputy PM says - “We have to put the financing in the budget so that at least 5 million impoverished Italians can get back to work.”
90.00 might break soon, on the back of continued tension between Italy's populist government and the EU.
Recent comments from Italy's DiMaio continue to worry markets that a future clash is possible which will put yet another dent in the EU's cohesion.
Our negative bias remains in play as prices continue to hold below the recent flip zone.
BTPs bounced the key resistance area and have closed below a recent flip zone on the back of fears that Italy will not comply with EU rules in forming it's next budget, that contains flat-tax proposals and a hefty pension reform. Look for further losses today.
Italy's Deputy PM DiMaio confirms markets' fears: this morning he said that respecting fiscal rules is not the priority in the next budget. Until 94.00 is broken to the upside, pressure still remains. Better picture if we hold here below 93.00 and push towards 90.00 again.
Italian BTPs are under pressure again, after bouncing recent highs. The narrative this time round is a top-level meeting amongst ministers to plan the next budget. The market fears that Italy's populist government will pressure EU fiscal rules...