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☆ New ECB rating agency Scope puts greater weight on euro zone protection mechanisms
▼ + stars: | 2023-11-27 | by ( Marc Jones | ) www.reuters.com time to read: +5 min

While the euro zone has pledged to do "whatever it takes" and jointly issued debt for the first time during the pandemic, its debt load remains eye-watering. Scope assigns Italy a "stable" outlook, but "risks remain", Shen said, "given the weak growth and fiscal outlook". Reuters GraphicsNEXT CRISISThe ECB uses the best rating available from its approved agencies to determine a bond's collateral value when commercial banks borrow from it. Last week's Dutch election win by the far-right Geert Wilders could also have rating implications, Shen said. "Governance risks are a challenge in the longer run for one of the world’s remaining AAA-rated sovereigns...But the rating is not imminently at risk."

Persons: Yorgos, Moody's, Dennis Shen, Fitch, DBRS Morningstar, Shen, DBRS, bode, Geert Wilders, Marc Jones, Kirsten Donovan Organizations: REUTERS, Companies, AAA, European Central Bank, Reuters, Reuters Graphics NEXT, ECB, Thomson Locations: Athens, Italy, France, Berlin, U.S, Greece, Spain, Portugal, Cyprus, Rome, Canada, Dutch

☆ ECB's Stournaras interview with Reuters
▼ + stars: | 2023-10-12 | by ( ) www.reuters.com time to read: +9 min

Member of the ECB governing council and Governor of the Bank of Greece, Yannis Stournaras talks during an interview with Reuters in Athens, Greece, October 11, 2023. The rise in bond yields means that financial conditions are even tighter Than before given monetary policy decisions. A: I think we should act only based on monetary policy reasons and justifications. And for the moment I see no reason why we should tighten monetary policy now because increasing the minimum requirements will imply monetary policy tightening. So, we have a pipeline of monetary policy tightening which has been decided in the past.

Persons: Yannis Stournaras, Louisa Gouliamaki, European Central Bank policymaker Yannis Stournaras, it's, I'm, reinvestments, Francesco Canepa Organizations: Bank of Greece, Reuters, REUTERS, Rights, European Central Bank policymaker, ECB, European Commission, Governing, Thomson Locations: Athens, Greece, Palestine, Russia, Ukraine, Iran, China, Europe, Israel, Italy

Because higher yields signal a rise in borrowing costs, the selloff has raised questions about the long-term sustainability of Italy's huge debt pile. Meloni has said she is not worried by the rise in yields, saying: "Italy is solid." Most of the sources said there is no hurry to end reinvestments or even to formally open this discussion on the policy-making Governing Council. Some argued that PEPP reinvestments should end before any talk of a rate cut, now expected by markets around mid-2024. Spreads of Italian 10-year bonds over their German counterparts are up roughly 30 basis points this month in their biggest jump since last December.

Persons: Wolfgang Rattay, Giorgia, Christine Lagarde, Meloni, PEPP, Balazs Koranyi, Catherine Evans Organizations: European Central Bank, ECB, REUTERS, Rights, Central Bank, Thomson Locations: Frankfurt, Germany, Italy

☆ Italy's deficit hikes could threaten its credit rating - Scope
▼ + stars: | 2023-10-06 | by ( Sara Rossi | ) www.reuters.com time to read: +3 min

The eligibility of Italian securities under the ECB's TPI "is a key driver of its BBB+/Stable credit rating," Scope said. It will review its rating of Italy's debt on Dec. 1. More specifically, countries must respect the EU's economic prescriptions, have a sustainable public debt, and not show any macroeconomic imbalances. RATING AGENCIES' TESTBefore Scope assesses Italy's rating in December, the country faces scrutiny from several larger agencies. From mid-October to mid-November, S&P Global, DBRS, Fitch and Moody's all have the euro zone's third largest economy up for review in what analysts say will be key tests for the stability of Italian bond yields.

Persons: Giorgia, Christine Lagarde, DBRS, Fitch, Sara Rossi, Gavin Jones, Andrew Heavens Organizations: MILAN, Central, Reuters, ECB, P, Italian Treasury, European Union, TPI, European, Thomson Locations: Italy, Italian, Rome

☆ ECB’s crisis tool works best if it’s never used
▼ + stars: | 2023-05-30 | by ( Rebecca Christie | ) www.reuters.com time to read: +8 min

BRUSSELS, May 30 (Reuters Breakingviews) - In the euro zone bond market, unlimited backstops are the cheapest. The European Central Bank has been trumpeting its ability to buy member states’ debt if it comes under attack from investors. The danger here is that too much divergence would lead the euro zone to fracture, creating a powder keg for crisis. The central bank has been deliberately quiet about exactly when and how it might activate the crisis tool, except to say it will be ready if necessary. They have noted that the euro zone central bank has a new instrument to combat any sharp increase in the differential between yields of euro zone government bonds.

Persons: Christine Lagarde, –, Lagarde, Fabio Panetta, hasn’t, there’s, Nils Redeker, Berlin’s Jacques Delors, Philip Lane, Francesco Guerrera, Oliver Taslic Organizations: Reuters, European Central Bank, ECB, Italy, Reuters Graphics Reuters, ECB won’t, Reuters Graphics, U.S . Federal, Silicon Valley Bank, Signature Bank, ”, European Union, Twitter, Thomson Locations: BRUSSELS, Frankfurt, Italy, Spain, Greece, Lithuania, Silicon, EU, Ukraine

☆ Factbox: What can the ECB do to stop the banking crisis?
▼ + stars: | 2023-03-20 | by ( ) www.reuters.com time to read: +3 min

Here's a look at the European Central Bank's "toolbox", which has been expanded over the past 15 years in response to the global financial crisis of 2008, the ensuing euro zone debt crisis and the COVID-19 pandemic. LONG-TERM LOANSThe ECB can reactivate its Targeted Longer-Term Refinancing Operations (TLTRO), offering banks multi-year loans at low interest rates. Banks continued repaying their existing loans last week despite the Credit Suisse crisis. But the ECB has also been reducing this form of money printing to raise the cost of credit. Unveiled at the height of the euro zone financial crisis by then ECB President Mario Draghi, the scheme quashed speculation of a break-up of the currency bloc but never came close to being used.

☆ It's time to buy this under-the-radar wind stock poised to benefit from the latest climate bill, Bank of America says
▼ + stars: | 2023-02-24 | by ( Samantha Subin | ) www.cnbc.com time to read: +1 min

Bank of America says it's time for investors to buy this little-known wind blade manufacturer poised to capitalize on Inflation Reduction Act tailwinds. TPIC YTD mountain TPI Composites shares so far this year Shares of the wind stock have jumped nearly 39% in 2023 after a 32% slump in 2022. The bank lifted it's price target to $14 from $9, suggesting shares should remain rangebound near term. So far this week, shares gained nearly 11%, despite fourth-quarter earnings falling short of estimates, according to FactSet. Among his reasons for the double-upgrade, Dumoulin-Smith cited a margin recovery and improving free cash flows.

☆ Analysis: Italy's rates clash with ECB a sign of things to come for euro zone
▼ + stars: | 2022-12-20 | by ( Francesco Canepa | ) www.reuters.com time to read: +4 min

Summary Euro zone governments offering cost-of-living subsidiesECB has warned it won't compensate for "policy errors"Clashes seen widening beyond ItalyFRANKFURT, Dec 20 (Reuters) - Attacks by Italy's new government on the European Central Bank over its plans to raise borrowing costs may be a sign of things to come for a euro zone struggling with inflation and debt. It also showed the ECB did not fear penalising the most indebted of the 19 euro zone countries, Italy among them, which tend to see their borrowing costs rise disproportionately when credit becomes more expensive. "The ECB is clearly ready to take risks with fragmentation in the euro area," Gilles Moec, chief economist at AXA Investment Managers, said. With bigger deficits to refinance and the ECB raising interest rates while also winding down its bond purchases, markets have pushed up yields across the euro zone and particularly for the weakest borrowers, such as Italy. But the ECB has been clear it won't be used to rescue countries that have made imprudent "policy errors".

EARLY WARNING SIGNSAfter years of tame inflation, Fed officials and other central bankers say they have faced a chain of disruptive events beyond their control ranging from the COVID-19 pandemic to the Ukraine war. The central bank has made conservative estimates on inflation despite Russia cutting gas supplies to Europe in response to Western sanctions over its invasion of Ukraine. Even as some economists say an inflation peak could now be in sight, central bankers remain far from taming inflation. The concern among some central bankers is that politicians will respond by raising public spending and so aggravate the inflation pressure that their rate-hike cure is intended to heal. If that were to happen, central bankers “would have to reverse course to prevent the debt market from becoming more disorderly," Goodhart told Reuters.

The ECB, which bought 5 trillion euros of bonds ($4.9 trillion) over the past decade to lift low inflation, now finds itself battling record high inflation at 10%. "This consideration also makes the practical implementation of ECB QT significantly harder," BofA said. That would reduce its balance sheet by a "manageable" 155 billion euros in 2023 and 300 billion euros in 2024, ING reckons. An eventual wind-down of PEPP holdings could add to balance sheet reductions in 2025 worth a total 388 billion euros, ING said. AllianceBernstein portfolio manager Nick Sanders said he was "sceptical" how the ECB could achieve QT with those protections in place.

☆ ECB policymakers see no need to aid Italy with new scheme: sources
▼ + stars: | 2022-09-29 | by ( ) www.reuters.com time to read: +3 min

But four sources close to ECB decision makers said they saw no need to activate TPI because the market reactions did not appear "disorderly" or "unwarranted" - two key conditions for activating the scheme. The spread, or risk premium, over German debt edged above 250 basis points, the level at which the ECB stepped in last summer. More specifically, countries must respect the European Union's economic prescriptions, have a sustainable public debt and not show any macroeconomic imbalances. Asked about Italy earlier this week, ECB President Christine Lagarde said the scheme would not be used to buy the bonds of countries that make "policy errors" - without singling any out. The ECB can also use proceeds from its Pandemic Emergency Purchase Programme to buy bonds from indebted countries like Italy above their designated quotas if needed.

☆ Asked about Italy, ECB's Lagarde says she won't fix 'policy errors'
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, Sept 26 (Reuters) - The European Central Bank won't use its latest emergency scheme to buy the bonds of countries that make "policy errors", its President Christine Lagarde said on Monday in response to a question about Italy's likely next government. A right-wing alliance led by Giorgia Meloni triumphed in Italy's general elections on Sunday, inheriting one of the euro zone's heaviest debt burdens at a time of rising borrowing costs and looming recession. "It's (used in) a situation where ... there are disorderly market dynamics that are not justified by fundamentals or by economic policy errors that will have been made," Lagarde said. "This limits the risk of fuelling inflationary pressures, thereby also facilitating the task of monetary policy." Lagarde also repeated the ECB's most recent message that interest rates will need to rise over the next several policy meetings even as growth slows substantially.

☆ Italy's right-wing bloc wins election: five questions for markets
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +6 min

REUTERS/Guglielmo MangiapaneMILAN/LONDON, Sept 26 (Reuters) - Italy's right-wing bloc should have a solid majority in both houses of parliament following Sunday's election, potentially giving the country a rare chance of political stability after years of upheaval and fragile coalitions. The absence of the anti-euro rhetoric seen in the 2018 election had reassured investors in the run-up to the vote. With markets watching closely, we take a look at five key questions on the radar. Reuters Graphics2/ Could Italy's EU funding plan be modified? The Brothers of Italy sees room to amend Italy's EU-backed recovery fund programme to account for the energy shock.

☆ Market reaction to Italy election outcome
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +6 min

Leader of Brothers of Italy Giorgia Meloni reacts at the party's election night headquarters, in Rome, Italy September 26, 2022. It last traded at 234 basis points. "Today's upward movement is a continuation of the market reaction seen on Friday after Britain's mini-budget and sounds like a warning to the eurozone countries as well." LUCA CAZZULANI, HEAD OF STRATEGY RESEARCH; LOREDANA MARIA FEDERICO, CHIEF ITALIAN ECONOMIST, UNICREDIT"We expect a rather muted market reaction in terms of BTPs credit spread in the short term, as the election outcome was broadly in line with expectations." We continue to expect the 10-year BTP-Bund spread to trade close to 250 basis points until year end."

☆ Italy's right-wing bloc set for election win: five questions for markets
▼ + stars: | 2022-09-19 | by ( ) www.reuters.com time to read: +5 min

Giorgia Meloni, leader of the nationalist Brothers of Italy, is seen as frontrunner to become Italy's first female prime minister. read moreThe absence of anti-euro rhetoric seen in the 2018 election has reassured investors, for now. At around 225 basis points, the closely watched gap between 10-year Italian and German bond yields has been relatively stable . That would cause some angst since the constitution protects issues related to Italy's EU membership. read moreReuters Graphics2/ Could Italy's EU funding plan be modified?

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