Political news these days risks taking a back seat, as demonstrated by the Italian crisis or the dramatic epilogue of the Trump presidency.
The Italian fibrillations they had no influence on the performance of the Btp auction. The new 7-year BTP maturing in March 2028 (coupon 0,25%) was placed for 4,5 billion at a yield of 0,30%, up from 0,19% at the mid-December auction. The second tranche of the BTP 30 years September 2051 1,70% was assigned for 2 billion with a yield of 1,47%. Bid-to-cover at 1,37. The spread rose slightly to 115 basis points, from 112 yesterday. And Citigroup recommends taking advantage of any declines in the Italian 1,10-year bond to increase Italy's debt exposure. Such indifference can be explained by returns. As Intermonte points out, a subscriber who buys, for example, the ten-year BTP and lends it in repo, receives a total of about 16.000%, not bad considering that negative-rate bonds in the world amount to over XNUMX billion dollars”.
Meanwhile in Washington is about to go on stage the first big challenge of the next tenant of the White House. "The story is simple: either we move now, or things are destined to get so much worse as to make it much more difficult to find a solution," said Joe Biden, now one step away from entering the White House, aware that today in the Senate a significant part of the popularity that he and the democratic party enjoy on the financial markets will be played out. At the center of attention will not be the historic appointment with the impeachment of Donald Trump destined to arrive in the Senate perhaps only after Tuesday, once the new president has already taken office, but the presentation of the stimulus package to the economy to counter the effects of the pandemic. That is, the first economic policy intervention after the promises of the electoral campaign, particularly significant and expected because it coincides with the return, after six years, of a Democratic majority in the Senate, the real guarantee of a breakthrough expected (or feared) by the markets.
Hence the market's expectations, amplified by the alarming news of the pandemic and the disappointing data on employment in December, which fell for the first time (140 fewer jobs) after the recovery following the first shock of the pandemic. “This was not an isolated episode - warns Austan Goldsbee, former head of economic advisers to Barack Obama and central figure in Biden's electoral campaign staff - we are witnessing a precise trend: it is an alarm signal which, without precise interventions, we risk falling back into recession”.
This is the climate which, according to the advances to the newspapers, suggests a robust intervention. But how sturdy? The president's staff made no official announcements. Group parent Chuck Shumer anticipated that a $1.300 trillion request would likely be insufficient. CNN talked about a $2.000 trillion package. Not bad considering that after the anti-pandemic interventions, the intervention plans for infrastructure, construction and the environment will arrive between now and March, that is the backbone of the New Deal as promised by the democratic president. Basically, a large-scale intervention is looming which, for now, has not aroused the feared reactions of the markets that are not afraid of inflation. The only real enemy remains the pandemic.
