Bund-BTP spread to go back to 150 bps, says UBS
TLT•UBS recommended shorting Italian government bonds against German counterparts, targeting a Bund-BTP spread of 150 basis points, up from 119 bps when the call was announced and 123 bps later on Friday.
1. UBS targets wider spread
UBS bond strategists recommended investors go short Italian government bonds against German counterparts, targeting a Bund-BTP spread of 150 basis points. The spread was 119 bps when UBS announced the recommendation earlier Friday and had risen to 123 bps.
2. Spread and market context
Italian debt has sold off this week as government bonds, notably in France, came under pressure and investors sought safe havens. UBS said it was skeptical Italy could sustainably decouple from France and saw a greater risk of Italian spreads moving closer to French spreads versus German Bunds. The spread was below 60 bps early this year and above 250 bps in late 2022.
