everything goes smoothly. How long? The key titles

Below is the interview with Sante Pellegrino, an independent trader, to whom we asked some questions on the current situation of the bond market.

The BTP-Bund spread has continued to decline in the last few days. Is the current trend destined to continue?

The change of government in Italy and the tensions on the inflation front in Europe have not prevented the Spread BTP-Bund from falling further and this has happened because the German yield is rising and this is to the detriment of the Bund.

This somewhat anomalous situation helps the Italian market with a more favorable scenario for the BTP-Bund Spread, for which we confirm the resistance at 240/250 and at 260 basis points.

A sort of oversold is confirmed, bringing the differential between the Italian and German ten-year period to support of 215/210 basis points.

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A drop below the 200 basis points area would be desirable, in order to be able to face the recovery of the lower part of the BTP-Bund Spread channel with more confidence.

For the moment, everything is going smoothly and if the threshold of 200 basis points were to be exceeded, which I believe is likely, it will be even better.

The yield of the 10-year BTP has also taken a decisive path downwards. What are the expectations in the short term?

The easing of the speculative grip on bonds is bearing good results also for the ten-year yield which is confirmed to be falling.

This offers the opportunity for listed bonds to recover, with the 10-year yield falling from 4.8% to 4.2% / 4.15%.

Such a trend is undoubtedly favorable to the recovery of that part of the bonds sold in the last months.

Below the 4.2% level, the scenario will be positive and in the event of a decline below 4.1% it will be even better, with possible targets at 3.8% / 3.7%.

Which BTPs are you keeping an eye on more than others in this market phase and what are you waiting for now?

The index of listed BTPs is recovering strongly and fortunately we are one step away from the resistance of 86 euros per 100 contract, so it means that the bond index has recovered on average 5-6 euros of contractual value.

The goal is to exceed the 86 euro threshold and rise to 92-94 euro, where the smile would return to all listed BTPs.

The BTP 2067 is recovering well and should hang up to the highs of 82 euros per contract and from there stretch up to 83-84 euros.
Negativity only in the event of a return below 69 euros per contract, a prelude to a wider decline towards 66-65 euros.

Positive situation also for the BTP 2072 which exceeded 64 euros per contract and can reach 68 euros and then stretch up to 70 euros.

Positive also for the BTP 2051 which is above 60 euros and can rise towards 63 and 65 euros, with a subsequent projection to 75 euros.

How do you assess the current setting of the Bund yield and the 10-year Treasury and what are the possible scenarios now?

The yield of the American ten-year fell below 4% and reached 3.97%, with a situation favorable to a decline that could lead up to 3.75%.

Even more favorable is the scenario for the 10-year Bund yield which fell from 2.5% last week to 2% today.

Expectations are for a further decline up to 1.75% in order to finally be able to have a situation of greater peace of mind on the markets.

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About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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