HALISTER1: Close 5Y Italy vs Spain on Positive Election Reaction: BofAML

Close 5Y Italy vs Spain on Positive Election Reaction: BofAML

(Bloomberg) -- Despite Spanish political uncertainty remaining high, markets have reacted favorably to the fact that a Podemos-led government has been ruled out, BofAML strategist Erjon Satko writes in client note.
  • Does not see upside in long 5y Italy vs Spain anymore and decide to close it at -5bp
  • This said, a strong political consensus may be hard to reach soon, which could leave the domestic economy vulnerable to potential shocks in the medium run
  • Italian banking system’s NPLs remain high and the Oct. referendum on constitutional change is also a big unknown
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Erjon Satko (Merrill Lynch International)

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