The stalemate over negotiations between Iran and the United States has brought instability back to European bond markets. The spread between Italian BTPs and German Bunds began to grow again, returning to 75 basis points at the opening of April 22nd. Yesterday’s decline therefore did not consolidate and the differential returned to Monday’s levels.
German yields remain just below the 3% threshold while Italian yields rise, clearly above 3.70%, a few days after the start of the end-April auctions. The exit from this phase of instability seems directly linked to the normalization of the situation in the Middle East.
Spreads rising, BTP yields growing
The spread between Italian BTPs and German Bunds began to grow again, reaching 75 basis points at the opening on 22 April. The increase in the differential was caused by a significantly faster growth in the yields of Italian government bonds compared to that of the German 10-year counterparts.
In fact, the Bunds managed to remain below 3%, while the Italian bonds exceeded the 3.73% yield, growing from the 3.70% of yesterday 21 April. A distance that once again shows the fragility of the Italian system to international issues and, in this period, in particular to the war in the Middle East.
In fact, during the night, US President Donald Trump announced that the peace talks with Iran, which should have been held in Pakistan, have been postponed. The ceasefire between the two countries was extended without expiration, but the US naval blockade of the ports remained in place. As a result, the Strait of Hormuz also remains closed.
France and Spain burn yesterday’s progress
Spain and France also saw their differential with Berlin increase. Yesterday, both countries managed to reduce the spread, lowering their yields at a better pace than that of Bunds. Today, however, that gain was effectively cancelled.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 2.98% | – |
| Italian BTPs | 3.73% | 75 |
| French Oats | 3.62% | 64 |
| Spanish bonos | 3.42% | 44 |
The Bonos record returns close to 3.42%, with a spread that consequently exceeds 44 points. The French Oat instead returned to a 64 basis point spread, with a yield of 3.62%.
The auctions at the end of April and those at the beginning of May
The Ministry of Economy and Finance is preparing for a new BTP issue. The auctions will begin on April 24th and will continue after the weekend. The Btp€i one was cancelled, due to the issue of a new similar product in the near future. The auctions at the end of April will be:
- the auction of Short Term BTPs on 24 April;
- the Bots auction on April 28th;
- the auction of medium and long-term BTPs will take place on 29 April.
Two more auctions will be held at the beginning of May:
- the Bots auction on May 7th;
- the auction of medium and long-term BTPs will take place on 8 May.
