The latest confirmation came from Philip Lane, the chief economist of the ECB who is now the most reliable interpreter of the central bank's monetary policy lines. Once the pandemic emergency is over, he said, European rates will remain low for quite a while longer. These words, contained in an interview with the Wall Street Journal on Thursday, gave a further boost to purchases of European and Italian government bonds in particular, the favorites of the markets in this sudden spring of debt. On Monday morning, the ten-year BTP yield fell below 0,70% for the first time in history, while that of the thirty-year bond fell to 1,60%, again this is the new record low. The trend, moreover, has lasted for weeks now: the Btp 10 closed on Friday the fifth positive week in a row with a cumulative progress of 0,55%.
In short, despite the fact that the Italian public debt is close to 160% of GDP, the markets attribute to Italian paper the value they were denied in the past. In November 2011, for example, when the spread reached 530, overwhelming the Berlusconi government, or at the debut of the yellow-green majority when the gap reached 320. Or, the last surge, on 17 March when the lockdown favored a leap to 276. Other times. Today various factors justify the markets' approval of Italian debt: expectations on the Recovery Fund, the greater government stability (after the electoral outcome of the regional elections) and the correct management of the Covid emergency (also appreciated by media such as the Financial Times, often critical of Italy) have impressed the stime on the credibility of our country system with the result of favoring the comeback also against Germany, the engine of the renewed expansive economic policy of Euroland. Fiscal policy and monetary policy, for once, seem to get along, though we must not underestimate the resistance of the "hawks", the only factor according to Fitch that can interrupt the honeymoon.
But the risk, for now, seems remote. For multiple reasons.
- The market expects a new round of stimulus from the European Central Bank in light of the latest worrying numbers of the pandemic which risk curbing the difficult recovery that started last spring.
- But the cost of Italian debt is still significantly higher than those of Spain and Portugal, whereas it was lower than them just a few years ago. It is a theme to be addressed, because it means that there is still room for it to drop further, given the conflicts between Madrid and Catalonia and the explosion of the contagion in Spain.
- From a graphical point of view, according to the experts, the downward breakthrough of the previous historical low dating back to 2019 at around 0,80% has paved the way for further progress. Given the current scenario, we can estimate a zeroing of the spread against Spain (today 55) and a drop below 100 of the Italy/Germany spread (today 124).
These forecasts help answer the most logical question: is it the case to continue insisting on our home bond? Or should those who invest and not resign themselves to telephone area code returns direct their savings towards other shores?
- In general, the situation favors a greater appetite for risk. the Central Banks will maintain their accommodative stance for a long time to come, somewhat everywhere. In the United States, the new "average inflation" target outlined by the Federal Reserve (Fed) actually points to a very rare picture: in fact, over the last 50 years, the index of personal consumption expenditure has reached or exceeded 2%. only in 22 months. Other central banks, such as the Reserve Bank of Australia, have hinted that they may soon make further rate cuts, while the Bank of England continues to contemplate negative rates. Whichever loosening tool you choose, it is clear that monetary policies will continue to limit returns. The most recent developments on the pandemic front also suggest that a significant increase in government bond yields is unlikely in the near term.
- "Developed market government bonds may not offer the same coverage as they once did, but they still managed to generate positive returns in a month when equity markets fell," reads a JP Morgan report. In short, government bonds are more profitable than you think. In particular: in September, while the positive phase for equities underwent a reversal with a monthly return of -3,8% for the S&P 500, government bonds of Developed Markets recorded a total return of 0,7%”. In particular, German Bunds, which had started the month with a yield of -0,4% at the 1,0-year end of the curve, subsequently generated a return of XNUMX%, demonstrating that even bonds with negative yields can constitute a stabilizing element for a portfolio. The Bot people who don't just look at returns but know how to move from a capital gain perspective have nothing to complain about. Not easy for non-professionals. But that's what the funds are for.
