BTPs Yielding 1% More In Two Days Since LCH Margin Cut

In what will likely be the fastest margin cut-to-hike about face, we note that since CC&G (and then subsequently LCH) cut margin rates on Italian debt last week, 10Y BTPs are now trading over 100bps higher in yield and 110bps wider in spread (and CDS +120bps). Both long-and short-term, it seems a margin hike is just around the corner, as we warned last week on the CC&G announcement, and with the ECB now a little less aggressively rerisking their already debt-laden balance sheet, it seems once again managers used the SMP-indiced better prices to cover stuck longs.



Short-term, it seems the margin cut was horribly mis-timed...


...and long-term there is no justification for what was clearly a suspiciously-timed decision as BTPs head back towards 7% yield.

Charts: Bloomberg