Italy’s rating is one step away from the promotion: Fitch, Moody’s and DBRS all have a positive outlook on the country, and between September and November the first reviews could arrive.
The favorable perspective, if confirmed, would have important repercussions on the BTPs, the corporate bonds and on many of the main actions listed in Piazza Affari.
Waiting for the moves from rating agencies
Italy has earned the trust of investors with tax discipline, political stability and a record collection capacity in the latest auctions: just think of the 217 billion demands recorded for the BTP auction at 7 and 30 years old, with the treasure that placed titles for 18 billion, 70% of which ended in the hands of foreign investors.
The favorable picture is told by Luigi De Bellis of Equityreached by Milan Finance. In this context Piazza Affari remains among the best European bags, despite being still at a discount compared to the historical average and Eurostoxx. And the BTP-Bund spread, at the minimums since 2015, reports a much lower perception of risk than other great broadcasters, including France.
The eyes are focused on Fitch (September 19), DBRS (October 17), S&P (October 10) and above all Moody’s which will have the last word on November 21.
For Italy the upgrade of Moody’s would be particularly relevant: today the judgment is Baa3, that is, just a step above the “Junk” category. A transition to Baa2 would mean armor access to large international funds, avoiding the risk of exclusion from regulated portfolios for years.
BTP and Bond, where the spotlights are concentrated
An improvement in the rating would reduce the perception of risk and therefore the BTP-Bund differential. The effects would be more evident on long deadlines, from 10 to 30 years, very sensitive to the judgment on credit merits. Here the interest of global investors is concentrated, always ready to increase the exposure when the sovereign risk falls.
The benefit, however, would not stop for government bonds. Enel, Eni, Snam, Terna, Intesa Sanpaolo and Unicredit, to mention some names, could obtain funding for more favorable conditions, thanks to the so -called state “umbrella”.
Banks on the front line
On the stock exchange, the most sensitive sector to the upgrade remains the financial one. Unicredit, Intesa Sanpaolo, Generali and Banco Bpm are to be kept an eye on because they benefit directly with the compression of the spread: the cost of the collection drops and the value of the BTPs in the wallet rises.
Among the bank securities to be more careful there are also Bper, Credem and Mps, while in the managed savings, Finecobank and Banca Mediolanum stand out.
The overall exhibition of Italian banks to government bonds exceeds 300 billion euros: the data alone explains how much the financial sector is linked to the trend of sovereign debt.
Utilities and Insurance
The utilities regulated such as Terna, Snam and Italgas are bound to the state rating. An improvement in the sovereign judgment would automatically translate into an upgrade for them too, with positive effects on the cost of debt and on the investment capacity.
Among the unregulated companies, Enel, A2a, Hera and Iren could benefit from lower financial charges, albeit with a less direct impact. In the wake, TLC and healthcare companies could also move.
On the insurance front, Unipol and Italian Poste deserve attention: both very exposed to the BTPs, both influenced by the volatility of government bonds.
