LIVE MARKETS-Bund-BTP spread to go back to 150 bps, say UBS

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com.

BUND BTP SPREAD TO GO BACK TO 150 BPS, SAY UBS

Italian debt has been one of the big winners of the last couple of years, but has taken a pounding this week, collateral damage in the selloff in government bonds, notably in France, that has driven investors seeking safe havens.

UBS reckon there is more to come, and their bond strategists have just recommended investors go short Italian government bonds against their German counterparts.

UBS' target is for the Bund-BTP spread to reach 150 basis points up from 119 bps when they announced the recommendation earlier on Friday. It's up to 123 bps already.

That's still well below late 2022's highs above 250, but remember the spread traded under 60 bps early this year, before the war in the Gulf.

UBS say that this cycle, "with resilient growth, energy price risks and a broadening demand for capital will put segments of the rate complex under pressure while demand for safety could increase."

"We have long been sceptical of the view that Italy can sustainably decouple from France. Instead, the greater risk is that Italian spreads move closer to French spreads versus German bunds," they write.

(Alun John)

*****

EARLIER LIVE MARKETS POSTS:

FRENCH IG CREDIT SHRUGS OFF OAT DRAMA, FINANCIALS TAKE HIT CLICK HERE

CALM TILL PAYROLLS, PERHAPS CLICK HERE

BEFORE THE BELL: EUROPE CALMER, BUT FRAGILE CLICK HERE

MORNING BID: CAN TREASURIES RALLY FOR A SECOND DAY? CLICK HERE