The rate hike isn't over yet. The hunger for BTPs is returning among savers.

This year's Assiom Forex Spring Conference 2023 focused on macroeconomic trends in the financial markets.

High corporate profits and the usual time delays have so far delayed the transmission of the rate hikes initiated by the ECB, but things are changing and the bulk of the transmission of higher money values to the real economy will occur in the coming quarters. This became clear during this year's Assiom Forex Spring Conference 2023 on macroeconomic trends in financial markets. According to Marco Valli, head of global research at UniCredit, the profit margin made by companies over the past two years has allowed them to delay the absorption of higher financing costs, but now this should change with modest economic growth and rates close to the terminal rate.

A new round of rate hikes.

According to Vallely, the deposit rate will rise to 3.75 percent in July with the possibility of further increases in September: the latter will depend on whether the ECB looks only at core inflation or also at labor market developments. According to Valli, the chances of a hike or pause in September are now 50/50, but the fact remains that while pressure on the market is easing, the disinflation process is only halfway through and must continue as well because UniCredit estimates that a return to the 2 percent inflation target will not occur until 2025. On a shorter horizon, Vallely sees no significant impact on government bonds from the repayment of 143 billion in LTRO loans to Italian banks at the end of June. The latter, explained Elisa Coletti, head of banking research at Intesa Sanpaolo, can expect Italian households' interest in government bonds to return.

The hunger for government bonds is returning.

In 2022 alone, after 10 years of disinvestment, Italian households actually put €54 billion in BOTs and BTPs and another €7.8 billion in bank securities. A recovery trend in investment in government bonds was also recorded in Germany, but not to the same extent as in Italy. The loan-to-deposit ratio, Coletti added, is at historic lows, and in Italy it is the lowest among the major eurozone countries. Moreover, in Italy and Spain the outflow of funds from current accounts is only partly directed to term deposits. In contrast, Lea Zicchino, head of analysis of financial markets and intermediaries at Prometeia, presented a liquidity analysis of ESG financial instruments, which, contrary to what it may seem at first glance, are more liquid, all other things being equal. Not only that: the liquidity of conventional bonds also improves for companies that announce green bonds, but only if they are issued multiple times. Finally, the liquidity premium for corporates has increased in favor of green assets during periods of liquidity shortages and after the ECB's revised monetary policy strategy.

Climate risks and sustainability in banking.

Finally, the conference touched on the importance of climate risk integration and the evolution of climate risk policy and regulation. Ivan Faiella of the Climate Change and Sustainability Group at the Bank of Italy illustrated the assessment of these risks, and Pietro Gugliotta, Deputy Head of Banking Supervision Service 2, presented the supervisory approaches adopted on these issues. "Lack of attention to social issues," Gugliotta explained, "often led to unfair business practices, overly complex or speculative financial products, inadequate data security and privacy safeguards. They caused indemnification obligations, reputational damage with loss of business and a negative impact on the income statement." "What is changing from the past," he concluded, "is the priority given to them by the global policy agenda and the spread of greater awareness of their importance. They are gaining significance in their own right and greater recognition/evidence from climate risks."