Italy’s Senate referendum: Summer is almost over - RBS

Marco Brancolini, Research Analyst at RBS, suggests that an introduction to the Italian Senate referendum, which is expected for late November, after the budget and before the Montepaschi deal.

Key Quotes

“The reform is aimed at curbing the powers of the Upper House, smoothing the legislative process. PM Renzi said he will resign if “noes” (which are currently in the lead) prevail. This would open a government crisis. A victory of the ‘yes’ campaign would put the M5S on the front foot: polls suggest they could secure a sound majority in the next national elections (pencilled in for 2018). We expect Renzi to add a fiscal sweetener to the budget, and the opposition to run a cautious campaign.

We remain positive on BTPs, on the back of further ECB easing, yield compression and supportive demand/supply dynamics, but we will look to cut Italian risk ahead of the referendum and continue to prefer SBGBs, targeting 30bp in 30y BTP/SPGB.”