TVC:IT10   Italy Government Bonds 10 YR
The 10y BTP Italy's benchmark Sovereign Debt has been discounted below par with other Sovereign Debt securities, in a sign of Sovereign Debt market broader repricing. The outflows from Sovereign Debt markets have in all probability helped to fuel the reckless allocation to stocks seen in these weeks.
In our view, these excessive speculative activities in stocks propped up by Wall Street's blindfolding narrative of increasing and excessive risk-taking involving also European stocks could be at a turning point.
In fact, most of the Sovereign Debt available do yield above the 2.0% inflation target, thereby those Bond yields could start to become interesting from a risk-reward standpoint, considering that a 2.0% yield with a 0.95% semestral coupon rate could in any scenario provide a satisfactory edged cashflow against inflation. In fact, the cumulative 2.0% Yield and 0.95% coupons can provide compounded exposure to coupon cashflows above Inflation for the medium and longer-term.
In the same camp, U.S. Treasuries yielding above +2.0% could start to become an effective hedge against inflation in the medium to longer-term, in fact, the 20Y Treasury auction has seen increasing interest by Bond Funds and Institutional Investors in getting their bond portfolios secure +2.0% yields for the longer term.
In the coming week, it could be a possibility to have large and consistent OUTFLOWS FROM STOCKS, while instead Institutional Investors and large Investment Fund could start reallocating toward Sovereign Debt.

The BTP chart from a technical standpoint provides a clear view of the oversold conditions in the below-par Sovereign Debt price of € 89.91. On similar prices, technical levels and market conditions, a flurry of buyers took advantage of the discounted Sovereign debt security Yield of 2.0% and semiannual coupon rate of 0.95%. The chart also highlights a wide price/volume gap that would need to be repaired with the BTP price probably drifting above par to €101.5<€102.


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