S&P's raised Italy's sovereign rating by one notch, from BBB- to BBB, associating it with a stable outlook. This is good news for our country. In the end, that recovery that has been painstakingly acquired and which is consolidating, as almost all the indicators now show, is sanctioned with a reduction in the risk of default on the Italian public debt. This is done by Standard and Poor's, perhaps the most influential of the three global rating agencies (the other two are Moody's and Fitch), which in recent years had also been the strictest towards Italy (Moody's and Fitch had arrested the deterioration to BBB). S&P's had in fact brought Italy's rating to BBB-, the threshold below which we speak of "junk bonds" and, consequently, there are few investors willing to buy those bonds and the interest rates required they go up drastically.
Therefore, we can expect that in the coming days the markets will reward Italian public debt, allowing the spread of BTPs over German Bunds to even fall below the 150-160 basis points, the range it has been in lately. Portugal's experience is interesting. A month and a half ago, Portugal's rating moved up from BB+ to BBB-, i.e. from "junk" to "investment grade". Subsequently, the spread of 60-year Lusitanian bonds against German Bunds of the same duration decreased by 70-170 basis points, reaching a level of 180-20 basis points with a considerable saving on Portuguese interest charges. It is true that going up from BB+ to BBB- usually implies a greater reduction in interest rates than going from BBB- to BBB, as going up from the "junk" band to "investment grade" marks a certainly more important discontinuity. However, moving further away from the "junk" band also counts for a lot. Therefore, a certain reduction in interest rates on BTPs can be expected, I would say at least by 30-XNUMX basis points.
What will the Italian government do with this margin of maneuver which, in all probability, it will find at its disposal? We must hope that the opportunity is not wasted to follow electoral instincts and, perhaps, implement short-term measures. The advice that can be given to the executive is to exploit the expected easing to favor a further recovery of the expansive investment cycle. For the third consecutive year, this year the dynamics of investments will exceed that of GDP. It is important that this phase is further consolidated. Only in this way will the Italian economy be able to get back on a path of stable growth and, hopefully, above 2%.
