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The new risk premium

The new risk premium | 22 February 2021

22 February 2021, EUR/USD

The new risk premium

EURUSD trading plan:

Italy's new Prime Minister Mario Draghi may boost the appeal of his government's bonds for foreign investors, and could even push their risk premium over German debt to the lowest level since the euro zone debt crisis. Draghi is widely expected to re-write Italy's plans for how to spend more than 200 billion euros ($240 billion) of EU funds and overhaul the public administration to guarantee it is well spent. The gap between Italian and German 10-year yields - the risk premium, or extra interest that Italy must offer to lure investors - briefly narrowed to 86 basis points, the tightest since 2015. This is a positive signal for the euro.

Investment idea: Buy 1.2110 and take profit 1.2150.

David Johnson
Analyst of «FreshForex» company
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