Bond Avalanche /Lavin/ Will Test the ECB

The 10 largest euro nations are expected to sell some €1.3 trillion ($1.38 trillion) of sovereign bonds this year. A little over half of that will be new money, after allowing for maturing debt.

Someone, somewhere is going to have to step up and buy all of these new securities. 

Italy remains the region’s problem child. Despite a large amount of EU aid, it still needs to sell €350 billion of bonds this year. The net new cash required is €67 billion.

Italy's debt sustainability is already in a precarious position, as 10-year yields having more than trebled during the past year to about 4.3% currently.

Lagarde needs to step carefully in raising rates too sharply, as well as withdrawing central bank liquidity at the same time.

Marcus Ashworth Bloomberg 6 januari 2023


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