1. Newsroom
  2. Italy – Back in the firing line
Menu
Analysen 23.04.2020

Italy – Back in the firing line

Italy – Back in the firing line

Our Global Head of Forex Strategy, Peter Kinsella, discusses how Italian bond yield increases are going to affect the euro.



This week the Eurogroup will meet to try to find a solution to financing COVID-19-related health and income support measures for the most badly affected EU nations. Italy, in particular, has forcefully argued for the costs to be borne by the whole of the EU. This has, however, been rejected by northern European countries, who fear that it will lead to a mutualisation of eurozone debt. We anticipate that the Eurogroup will either increase the European Stability Mechanism’s (ESM) borrowing capacity or seek to leverage the European Commission’s future budget revenues. These measures may bring some relief to markets in the short term, however, when the crisis passes, Italy could easily run a debt-to-GDP profile of around 160%.

Consequently, we believe that recent Italian yield increases will be sustained over the medium term, because investors will demand higher risk premia for holding Italian debt. The ECB has allocated around 40% of its recent asset purchases to Italian debt, which is far in excess of the Italian share of the ECB’s capital key. In the absence of ECB purchases, Italian yields would be substantially higher.

When the global recovery emerges in the third quarter, we believe that investors will pay closer attention to eurozone yield developments and this may present material risks for EUR exchange rates.

Our expertise

Peter_Kinsella_150x150.jpg
Peter Kinsella
Global Head of Forex Strategy

Expertise

Swiss & Global Equities

Why Swiss equities now? This market offers equity investors the stability and agility they need to navigate this volatile period. 

Read more
Expertise

European Equities

European equities offer unrivalled opportunities in terms of breadth of sector and market exposure.

Read more

Meistgelesene News

Analysen 01.10.2020

COVID-19: Die UBP hält Sie auf dem Laufenden

Seit dem Ausbruch des Coronavirus begleiten und unterstützen wir unsere Kunden während dieser ungewöhnlichen Zeit einer weltweiten Gesundheitskrise. Die Bank informiert Sie regelmässig über die Anpassungen ihrer Massnahmen an die von den Gesundheitsbehörden vorgegebenen Vorsichtsregeln. Ausserdem kommen unsere Experten zu Wort, welche auf die Auswirkungen der Pandemie auf die Weltwirtschaft und die Finanzmärkte eingehen.

Analysen 30.06.2020

Aktualisierter Ausblick 2020

Weltwirtschaft - quo vadis?

Analysen 24.06.2020

Market turmoil brings new opportunities for pragmatic investors

March 2020 was difficult time for many investors, as COVID-19 spread across Europe and the US, leading to sharp sell-offs in fixed-income credit markets. While such market turbulence is not to be welcomed, its occurrence can create opportunities.


Auch lesenswert

Analysen 21.11.2020

UBP Investment Outlook 2021

Schöne neue Welt

Analysen 09.11.2020

Will Chinese domestic consumers become the next global growth engine ?

China revealed the key themes of its upcoming 14th Five-Year Plan (14-FYP) and long-range objectives through the year 2035. The Fifth Plenum took place amid signs of stronger economic recovery, with better performance spilling over onto the domestic sector.
Analysen 02.11.2020

Perlen im SMID-Cap-Segment in Europa und der Schweiz

Unternehmen kleiner und mittlerer Kapitalisierung verzeichnen oftmals höhere Wachstumsraten und Renditen als Grosskonzerne. Es ist einfacher, ein kräftiges Wachstum von einer kleineren Basis aus zu generieren. Die sogenannten SMID Caps bieten Anlegern eine Positionierung in langfristigen Wachstumstrends.