atl Capital: “The ECB will intervene if the risk premium reaches pandemic heights”


“We have to talk about the risk premium again”, warns Félix López, partner and director of atl capital. The manager admits a tightening of funding conditions due to the general increase in the required profitability of debt following the European Central Bank’s (ECB) aggressive turn in withdrawing stimuli in an attempt to control inflation, and considers “which will mainly focus on the first half of 2022”.

A process in which the market is already considering up to two increases in official interest rates in 2022 by the institution that controls monetary policy in the euro zone, which inevitably implies greater tension in the spreads of the most indebted with Germany as a reference, the most Of course -as we are already seeing with Italy-, but atl Capital hopes that the ECB will intervene “if Spain’s risk premium rises to the maximum of the pandemic”.

Félix López believes that the institution will “reflect” if the tension rises because “It doesn’t make sense for everything to explode after years of effort” precisely to prevent financing conditions from stifling peripheral economies, something particularly critical in full recovery after the Covid shock.

The difference between the yield of the Spanish 10-year bond on the secondary market compared to the bundle The German rose to 154 basis points at the height of the pandemic, in April 2020, after the deployment of the ECB the historic emergency bond purchase programwhich ends next March, leaving only the plan before 40,000 million euros of acquisitions per month in the second quarter, 30,000 million in the third and 20,000 in the fourth, although in December the institution left de room to increase its market presence with respect to this estimate if it deems it necessary.

More information at the March meeting

Last week, the central bank’s tone became more aggressive, even opening up the option of an interest rate hike this year, which was not contemplated in December.

The institution’s meeting in March will shed light on this debate, which is very intense within the ECB itself, and while the interest rate on the Spanish bond has risen to more than 1%, that of Germany has definitely beaten 0%, and it is now time for it to be slightly above 0.2% and Italy’s around 1.8%, which has taken its risk premium to 160 basis points.

Spanish risk premium: at 85 points, far from pandemic peaks

atl Capital sees the Spanish differential remaining close to 100 whole numbers in the coming months, in a scenario of strong economic growth and improving global trade bottlenecks, in which they see inflation already easing at the course of the second semester from 2022, up to 2%.

“This rate of price growth will last”, points out the leader who, according to him, is in line with the will of central banks and responds to normalization after the period of negative rates, and “forces those saved to become investors”.

According to calculations by atl Capital, inflation of 2% in the coming years would mean “an erosion of savings of about 33%”.


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