Italy: political headache, structural issues
Economist (Euro area) - AXA IM R&IS
Senior Strategist (Interest rates, Govies, Linkers)
Download the Research 15/06/2017 289 KB PDF
Recent political developments should bring neither stability nor solutions to the country’s macroeconomic issues
- We stick to our baseline scenario in which the current legislature runs its course.
- A short deadline and lack of political will make the proposed electoral law unlikely to be implemented.
- Italy still has a weak macro outlook with subdued growth, high public debt while the banking sector issues are slowly resolving.
- Political risk is not the only driver for government bond spreads.
- ECB tapering could also have an impact. Currently, valuations are fair, but the market technicals look fragile.
- Net supply remains supportive this year, while market appetite for BTPs remains low. All in all, we maintain our neutral call.