The spread between Italian BTPs and German Bunds remained relatively low during the first minutes of the opening on April 20, despite strong tensions in the Strait of Hormuz between Iran and the United States. The differential settled at 75 basis points, lower than most of last week’s openings but 3 points higher than the closing on Friday the 17th.
However, the final hours of last week were characterized by strong optimism, following the announcement of a total opening of the Strait of Hormuz by Iran, after the ceasefire reached between Lebanon and Israel. However, Tehran almost immediately closed the passage, criticizing the US naval blockade of its ports. Both the Revolutionary Guards and the US military then attacked commercial ships transiting Hormuz in the following hours.
Btp-Bund spread under control despite the situation in the Middle East
The spread between BTPs and Bunds settled in the morning at around 75 basis points. The increase is significant compared to the 72 points at Friday’s close, but it is still a lower score than last week’s opening. The Bunds recorded returns of around 3%, while the BTPs at 3.75%.
As has been the case for almost two months, the trend of the differential is closely linked to what is happening in the Middle East. The drop on Friday was in fact a consequence of the announcement of the opening of the Strait of Hormuz and the rise in the early hours of Monday of its subsequent closure and the attacks by the Iranian and US armies on some passing commercial ships.
Europe remains awaiting talks in Islamabad
The performance of Spanish and French government bonds also reflects the trend of the last two months. Bonos and Oat remained more stable than BTPs, essentially maintaining the same shares as most of last week’s openings, at 44 and 63 basis points respectively compared to Bunds.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.00% | – |
| Italian BTPs | 3.75% | 75 |
| French Oats | 3.63% | 63 |
| Spanish bonos | 3.44% | 44 |
The relatively calm reaction of European bond markets to what appears to be a sharp deterioration in the prospects for peace in the Middle East may be linked to expectations about peace talks between Iran and the United States. This despite Iran, which according to the US newspaper Axios suspects that the talks are a cover for a surprise attack by the US, has rejected any diplomatic approach.
This week the last auctions of April
This situation of extreme instability is the context for the latest BTP and BOT auctions in April, which will begin on the 24th of this month and then continue on Monday and Tuesday of next week. The dates to be set for the next government bond issues are:
- the BTP Short auction on 24 April;
- the Bots auction on April 28th;
- the auction of medium and long-term BTPs will take place on 29 April.
The Btp€i auction will not be held on the 24th, due to the future issuance of two new government bonds, including a new treasury bond linked to Eurozone inflation, in the near future.
