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

Actualités les plus lues

Expertise 01.10.2020

Covid-19: Restez informés avec l'UBP

Depuis l’apparition du coronavirus, l’UBP accompagne et soutient ses clients dans le contexte inédit de cette crise sanitaire mondiale. La Banque vous informe régulièrement de l’adaptation de ses dispositifs aux règles de précaution fixées par les autorités et partage avec vous les dernières analyses de ses experts sur les conséquences de la pandémie pour l’économie mondiale et les marchés financiers.

Expertise 30.06.2020

Nouvelles perspectives d’investissement 2020 de l’UBP

L’économie globale à la croisée des chemins
Expertise 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.


A lire également

Expertise 21.11.2020

UBP Investment Outlook 2021

Le Meilleur des Mondes

Expertise 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.
Expertise 02.11.2020

Des joyaux cachés parmi les SMID Caps suisses et européennes

Les sociétés de petite et moyenne capitalisation («SMID Caps») affichent traditionnellement des taux de croissance et des rendements supérieurs sur le long terme en comparaison des grandes capitalisations. Il est en effet plus facile de générer une croissance dynamique à partir d’une plus petite structure. Par ailleurs, les SMID Caps suisses et européennes offrent généralement aux investisseurs une exposition idéale aux grandes tendances de croissance séculaires.