EGBS: [Correct]BTPs Underperform; Bond Supply The Main Focus For EGBs In January

Corrects maturity of new 7-year BTP to be launched in Q1.

The 10-year BTP/Bund spread is around 2bps wider at ~71.5bps, underperforming EGB peers despite a 0.3% rise in European equity futures. Weak growth signals from the December manufacturing PMI (47.9 vs 50.1 cons, 50.6 prior) may be weighing on Italian paper this morning, but the modest widening impulse had already started before the data was released.

EGB markets will also be focused on the anticipated seasonal increase in bond supply in January. Our full Eurozone issuance deep dive will be published early next week. We will be on the lookout for syndication mandates in several EZ countries.

• MEF has announced that it will launch a new 7-year Mar-33 BTP in Q1. MNI expects a January launch, potentially via syndication.  Italy’s first nominal BTP auction is scheduled for Jan 13.

Between Christmas and New Year, Italy’s Government approved its 2026 budget (despite tensions within Meloni’s ruling coalition). The budget deficit is targeted to fall to 2.8% GDP in 2026 – in line with the draft budget submitted to the EC in October. 

• Continued fiscal consolidation supported BTP outperformance last year, but Italy’s growth outlook may present a headwind to similar narrowing in 2026. The budget includes a tax cut for middle-income earners. It is hoped that this will support domestic consumption trends.