Italy is next on the political menu – Nomura

Research Team at Nomura, suggests that the upcoming Italian constitutional referendum is likely to be viewed by the market as the next political event and has the potential to dramatically surprise.

Key Quotes

“While we see a high probability of ‘no’ winning the referendum, it is unlikely to have a major impact on Italian politics. What would constitute a Brexit/trump event would be an early election, as this would likely lead to a Five Star majority in the lower house.”

“A resignation of PM Renzi is unlikely to trigger an election. The only way to trigger an early election would be with a vote of no confidence, which is unlikely to gather enough support, since the current government holds a majority of seats in both chambers. Nevertheless, given the uncertainty and the slower path for reform following a ‘no’ vote, we expect 10yr BTPs to underperform SPGBs.”