The interview with Pellegrino, PUBLISHED:
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BTP Spread Bund
The Spread falls, but the yield of the 10-year BTP remains above 4% pending the vote: what scenarios? The view of Sante Pellegrino.
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 Spread BTP-Bund is contracting in anticipation of the political elections on Sunday 25 September. What are the expectations for the next sessions?
After a quick rise towards 320 basis points, fortunately the BTP-Bund Spread is back below 240 basis points and there is a good chance it will drop to the 175 basis point support.
The differential between the German ten-year and the Italian one is overbought, it is below the resistance of 240 basis points and the hope is that this obstacle will keep the trajectory of descent up to 200 basis points before and 175 after.
The yield of the 10-year BTP remains steadily above the 4% threshold. Is there a risk that it will rise again?
In the face of the falling Spread, the yield of the 10-year BTP has also fallen, but in recent days it has exceeded the 4% threshold.
There is a double maximum of divergence which would mark a return towards a more moderate level, ie in the direction of the 3.5% area first and then in the direction of 3.3% / 3.25%.
It would be even better to go below this last level, with a projection towards the area of 3%.
It must be said that next Sunday’s general elections will have a negative impact on the 10-year spread and yield if the right-wing wins, but it is likely that there is no real coalition, given that there are visions within the center-right. also different.
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 has perhaps found a glimmer of support in the 87.8 area and it will be even better if it manages to overcome the decreasing resistance and therefore the level of 94-95 points. This would mean that all BTPs are realigning towards a rebound.
The BTP 2067, which is a bit of the market benchmark, dropped to support of 75/74 euros per contract and today found the strength to recover.
It will be necessary to overcome the 77.25 barrier to go above 78/79 euros, from which we could have a good recovery capable of bringing back towards 87/88 euros per contract.
The BTP 2072 has created a triple low in the 63 euro area and now it will have to exceed 66 to go towards 67.5.
What can you tell us about the recent performance of the Bund yield and the Treasury and what are the possible scenarios now?
Also for the yield of the 10-year Bund there is a double maximum and therefore the possibility of going down.
Some strong levels have been exceeded, such as that of 1.2%, but as soon as the 1.6% threshold is breached, the yield on the 10-year Bund may fall towards 1.3% / 1.2% .
The 10-year Treasury yield has a resistance threshold of 3.5% and we expect a double top in divergence for a return to 3% / 2.9%.