The 10-year BTP/Bund spread is testing the 78bps handle, with today’s 2.5bp tightening supported by positive risk sentiment (the S&P 500 index marked a fresh all-time high today, with EStoxx 50 index also up almost 1% intraday).
- The immediate downside target in the spread will be the August 13 close at 76.7bps, after which the 70bp handle will be in focus.
- Alongside the solid risk backdrop, September’s BTP/Bund narrowing has been supported by an ongoing pullback in EUR rates vol and relative political stability in Italy compared to the likes of France.