Halister News

(Bloomberg) -- Vanguard Asset Management sees value in the 50-year Italian government bond issued yesterday for the first time, and still favors 10-year bunds as talk of ECB QE tapering will probably prove to be “noise”.

• “It’s a dangerous talk and, probably, only noise,” London- based strategist Nick Eisinger says in a phone interview, referring to report on ECB QE tapering
• Says it shouldn’t really change the view that there will be an extension of QE program beyond March next year and that the existing QE parameters will be adjusted to address the bonds shortage issue
• Inflation expectations are still way off from ECB target
• If ECB tapers, say by EU10B, at the end of the year, “it would be very bad for the markets”
• Timing of talk of ECB tapering unfortunate for Italy’s issuance of 50-year bond; Treasury probably printed too much for the market to absorb it
  • Still, it’s an interesting bond as it’s the first time that the country issued ultra-long debt; Italian constitutional referendum still two months away
• More cautious on Portugal; it could be an opportunity after the DBRS rating review due on Oct. 21
  • Even if DBRS downgrades the country’s rating, making the Portuguese bonds not eligible anymore for QE, there could be more options for the country’s bonds; expects volatility
• NOTE: Italy’s $5.6 Billion Sale of 50-Year Bonds Beats Peers’ in 2016