Government bond yields still rising. The German 10-year bond, which is at 2.8% (+7 points), is at its highest since 2011. The BTP is at 4.66% (+8 points) and has reached the levels of the beginning of March this year. The French 10-year bond rises to 3.35% (+7 points).
The importance of foreign investors and Italian retailers
The latest data available is for the month of July. The balance of payments published by the Bank of Italy a few days ago indicates net purchases of Italian government bonds from abroad amounting to 7 billion euros. Given that, according to the US bank Citigroup, it brings the cumulative net balance of foreign purchases in the April-July period to 40 billion. In a context of the end of quantitative easing in which the ECB and the Bank of Italy will no longer purchase government bonds, the role of foreign investors has become decisive. But even more so is that of Italian retail savers who have absorbed the entire increase in public debt over the last twelve months. In the period from July 2022 to July 2023, in fact, domestic savers and non-financial companies increased the stock of BTPs in their portfolio by 120 billion euros (140 billion starting from April 2022).
The debt challenge
Now, the real challenge, regarding the debt, is its financing. As Federico Fubini writes in the Corriere, the real challenge is “finding investors who buy Treasury bonds at yields that are sustainable for the State. In particular, it is essential to have them to increase the free float, i.e. the share of new securities to be financed on the market in a year. In 2024 this increase in the free float will be record-breaking, at least 130 billion, a mass of bonds to be sold to private investors of a size never seen in Italy since the euro was introduced.” Just to cover the operating deficit for 2024 “a little more than eighty billion euros will presumably be needed (around 4% of GDP); furthermore, at present new issues of public bonds worth around thirty billion euros could be needed to cover the lower revenue from real estate tax credits; finally, it will be necessary to find buyers on the market for the securities that are currently in the hands of the European Central Bank, but which will expire and the ECB itself will not renew. All these elements are today at the center of the Treasury’s reflections. The measures of the maneuver, in comparison, seem like minor headaches.”
2023-09-25 13:06:57
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