Draghi's gift to Italy. Eventually everyone will buy Italian government bonds


Laura Naka Antonelli on FOL highlighted the issue of German Bunds assessed 850 billion dollars, which could offer zero returns.

This is the result of the zero-interest rate era, caused by the expansive monetary policy of the ECB, which increasingly characterizes the market for government bonds of Eurozone countries considered virtuous.

ECB monetary policy that "paradoxically" or strategically will help Italy. A gift from the outgoing president of the ECB, the Mario Draghi Nazionale. Apparently, everyone will now rush to buy "Italian government bonds"

Of the 57 sovereign bonds that Berlin issues, there are only six left to offer positive returns. All German bonds that have a maturity up to 20 years now have negative rates. And soon, Bloomberg writes in an article, the bonds to 30 years of Germany they could become the first in the world with a thirty-year maturity to make less than zero.

It would not take much then: a possible further escalation of trade war between the United States and China, the strengthening of a political risk that clearly sees Italy as the protagonist, and / or the arrival of new signals that confirm the ECB's desire to make the entire yield curve negative.

In this regard, yet another reassurance on the willingness to intervene with additional monetary stimuli have arrived in the last hours from the president of the ECB, Mario Draghi.

"If you asked me, just two weeks ago, if German rates at thirty would fall below zero, it would take me two days to stop laughing - admits, interviewed by Bloomberg, Luke Hickmore, money manager of Aberdeen Standard Investments. “Now, instead, it seems to have passed to a completely different market context, characterized by returns that are preparing to test further minimums and to go down to negative levels all over the world.

"The scope of what is happening is impressive". The consequences could be equally significant

In Germany, for example, if all the Bunds end up making zero or even less, insurance companies and pension funds they may find themselves forced to buy securities with rates below zero, given the need to maintain a certain degree of assets with high ratings in investment portfolios.

For their part, to be able to secure some form of gain, traders would be increasingly oriented to position themselves on riskier securities, like those, he explicitly writes the Bloomberg article, “Italian, corporate or emerging markets, to go hunting for yields ”.

It is "another signal of the so-called Japanese Japanizationa phenomenon that sees growth, inflation and bond yields remain depressed for a long period of time ”.

It is undoubtedly the Bce of Mario Draghi the author of what is happening.

The attitude of "Whatever It Takes"By Draghi, delivered in the opening speech of the Sintra Forum, led the amount of global bonds with negative yields to jump to the $ 12,5 trillion record.

In the specific case of Germany, it is difficult to believe that, with such low rates if not below zero, the government will remain idle. As Kacper Brzezniak, money manager at Allianz Global Investors, "If it is not this situation that will encourage them to borrow more and spend, not just what it can ever be.

Frankly, right now, if I were German Finance Minister, I would issue Bunds and buy Italian bonds".

It should be noted that the German Bunds at 30 years make 0,29% at the moment, with rates traveling at record lows.

Just to make a comparison, US rates at 30 years are around the 2,54% and the Italian ones make most of 3%.

According to Bloomberg's calculations, it emerges that the options market anticipates with a probability equal to one in three that German returns to 30 years will go into negative territory during the next year.

Even the Japanese bonds at thirty years of age have not come to make less than zero, testing a minimum, in the 2016, tollo 0,02%: currently, they have rates equal to 0,34%.

Only Switzerland has witnessed the red turn of its entire yield curve: it must be said, however, that the value of its sovereign debt market it is less than a tenth of the German one.

Could it be a good opportunity for Italian BTPs? Some say yes, given that the phenomenon of negative rates is becoming more and more contagious: the rates at 10 years of Dutch bonds are already negative, just as this week the securities with the same maturity have fallen below zero.i France, Finland and Austria.

In this situation, someone has already stated that Italian BTPs could become irresistible.


Draghi's gift to Italy. Eventually everyone will buy Italian government bonds