Buy the 3-year Spain/Italy spread says RBC, with "political uncertainty likely to linger and peripheral spreads in general likely to remain shaky going into year-end and the start of 2013." With more stability seen in Spain, "we recommend 3y SPGB-BTP tighteners targeting levels some 30bp tighter than current levels." On a medium-term basis however, RBC says this recent development will not lead to a meltdown in BTP yields alongside a pronounced bear-flattening of the BTP curve "and derail the general improvement of investors' perception with respect to the euro area's periphery over the past months."
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