The spread between Italian BTPs and German Bunds fell sharply in the first minutes of the opening on April 14th. The differential reached 76 basis points compared to 81 the previous day. A decline that reflects the markets’ optimism for a possible agreement between Iran and the US for a permanent ceasefire in the Middle East, as well as Israel’s opening to peace talks with Lebanon.
Italian government bonds recorded a sharp drop in yields, which allowed the recovery on Bunds, which remained stable. Italy continues to pay for its exposure to the energy crisis, but the intervention promised by the European Union in the matter could limit the damage.
Spread between BTPs and Bunds falling to 76 points
The early hours of Tuesday 14 April were positive on the bond markets for Italy. The spread between Italian BTPs and German Bunds, which indicates the difference in yield between the two 10-year benchmark government bonds, reduced from the 81 points reached on the morning of Monday 13th to 76 basis points. A drop due entirely to a collapse in BTP yields.
In the early hours of Monday, in fact, Italian government bonds had undergone an increase in the yield to investors which had distanced them from the equivalents of other European countries. Distance bridged on Tuesday morning, after the first news circulated about a rapprochement between Iran and the USA.
The two countries have returned to negotiations for an agreement on a permanent ceasefire, trying to reach a compromise on Tehran’s civil nuclear program. The situation remains stalemate at the moment, but Pakistan has proposed another in-person meeting in Islamabad.
Spain and France also reduced the spread
Spain and France also benefited greatly from the reduction in yields, with a decrease in the spread with Bunds. The Bonos fell below a 3.50% yield, bringing their spread to 44 basis points. The Oat similarly fell below 3.70% yield, with a spread of 64 points.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.05% | – |
| Italian BTPs | 3.80% | 76 |
| French Oats | 3.69% | 64 |
| Spanish bonos | 3.46% | 44 |
These decreases are also due to the European Union’s reassurances regarding the extraordinary measures against the energy crisis. Brussels, while stating that there will be no room for exceptions to the Stability Pact, has announced interventions to protect families and businesses from price increases.
The next BTP and BOT auctions
Having concluded the auctions at the beginning of April, with yields higher than those of the recent past, the Treasury is preparing for the second auctions of the month, those which will take place between the 24th and 29th. These are the most significant issues of the month, with different products available. The auction calendar for the end of April is:
- the auction of Btp Short and Btp€i on 24 April;
- the Bots auction on April 28th;
- the auction of medium and long-term BTPs will take place on 29 April.
