On the morning of April 21st, the spread between Italian BTPs and German Bunds began to fall again, reaching 73 basis points. The differential first fell at the end of last week and then rose rapidly on Monday the 20th, due to instability in the Strait of Hormuz and mutual attacks between Iranian and US ships.
The spread began to fall again also in view of the talks that should be held today in Islamabad between the US and Iranian delegations to reach a peace agreement. US President Donald Trump has warned that he will not extend the ceasefire with Tehran beyond its April 22 deadline.
Btp-Bund spread still falling at the opening
Significant drop in the spread between Italian BTPs and German Bunds at the opening of April 21st. The differential was reduced to 73 basis points thanks above all to a reduction in the yields of Italian government bonds, which came very close to falling below the 3.70% threshold. A result that has been missing for weeks, at least for a prolonged period of time, due to the instability brought about by the energy crisis.
The war in the Middle East continues to heavily influence the markets, but for Europe the best way to measure the consequences of the crisis is to look at the price of gas. Since March 19, the day in which methane reached its recent peak at 61 euros for spot contracts, the price of this raw material has continued to fall. It even dropped below 39 euros, still not to pre-crisis levels, when it had stabilized around 32 euros, but still at a much more reassuring price for continental economies.
European spreads are also falling
The Italian results were also followed by other European government bonds, which have partly abandoned the stability of recent weeks, starting to reduce their distance from the Bunds. The Spanish Bonos reached a yield of 3.40%, with a spread of 43 points.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 2.97% | – |
| Italian BTPs | 3.70% | 73 |
| French Oats | 3.59% | 62 |
| Spanish bonos | 3.40% | 43 |
The French Oat also improved their position, reaching 62 basis points from their German counterparts. The situation of Italian BTPs compared to these securities seems to have returned to before the crisis in the Middle East, around 10 points higher than OATs and 20 higher than Bonos.
The April BTP and BOT auctions
The drop in yields is good news for the Treasury, which is preparing for the first auction scheduled for the end of April. In fact, on the 24th the 3-year short BTPs will be issued, without however being accompanied, as initially expected, by the BTP€i. The cancellation of this auction was decided because, in the near future, two new government bonds will be issued, including a new BTP€i.
The other auctions at the end of April will be held:
- the Bots auction on April 28th;
- the auction of medium and long-term BTPs will take place on 29 April.
