BTP: UniCredit Expect Foreign Flow To Help Backstop Any Spread Widening
UniCredit note that “foreign investor purchases of BTPs in April was some of the strongest of the last few years. This is interesting because April was characterised by high volatility in financial markets due to U.S. President Trump’s tariff announcements”.
- They go on to highlight that as of the end of April “foreign investors held EUR 760bn of BTPs, in line with 2011 levels”. UniCredit suggest that “even after their strong buying in the past few years, foreign investors are probably still underweight BTPs and should have room for additional purchases in the coming quarters, provided Italy’s political and economic outlook remains supportive”.
- They also note that “at the same time, foreign investors now represent a smaller share of BTPs compared to 2011, when they held almost 50% of the market. This is good news for stability of the BTP-Bund spread, as these investors typically have a shorter investment horizon compared to most domestic investors”.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
PIPELINE: Corporate Bond Roundup: ADB, OKB, Turkiye & Kommunalbanken on Tap
- Date $MM Issuer (Priced *, Launch #)
- 05/21 $Benchmark Turkiye 7Y 7.75%a
- 05/21 $Benchmark Kommunalbanken +5Y SOFR+49
- 05/20 $Benchmark ADB 5Y SOFR+42
- 05/21 $Benchmark OKB 3Y +34
- $18.75B Priced Tuesday led by $7B Siemens 7-tranche package
GILT AUCTION RESULTS: Soft 4.00% Oct-31 Gilt Auction
Soft 4.00% Oct-31 Gilt auction: The bid-to-cover ratio of 2.74x was the weakest on record for this line. The average bid-to-cover ratio for the seven auctions (including the launch) going back to February 2024 was 3.09x.
- The lowest accepted price of 97.740 was also below the 97.7625 pre-auction mid-price. The secondary price of the Gilt is now 97.758.
- The auction tail was 0.7bps, above March’s 0.5bps but slightly below December’s 0.8bps.
- It’s possible that this morning’s BBG outages impacted demand at today’s auction.
FOREX: USD Slips as Markets Recorrelate with Long-End Weakness
A phase of dollar sales is helping pressure USD/JPY toward the overnight lows, with the dollar again pressured by weakness in the US long-end. The US curve is again steepening, with 30y yields higher by near 6bps on the day and equities weakening as the 'Sell the US' theme resumes.
- As has been the case in recent weeks, EUR is main beneficiary here - keeping $1.14 as the S/T upside target. EUR/GBP has printed a new high at 0.8459, shrugging off the entirety of the UK CPI tripped weakness to keep focus on 0.8470 the 50-dma.
- After a sluggish start hindered by Bloomberg Terminal connectivity problems, volumes in currency futures are picking up here, with near 7,000 contracts traded in JPY futures on the move. That's near $600mln cash equivalent on the latest USD/JPY sales.
