In the first minutes of the markets opening on 8 May the spread between Italian BTPs and German Bunds stabilized at around 75 basis points. The differential therefore interrupted the downward trend that had characterized the last few days and which had led to a reduction of 10 points in the spread and two tenths of the yields compared to the beginning of the week.
The stagnation is determined by a slight rise in yields, caused by the tensions that emerged yesterday between Iran and the United States. The navies of the two countries would have engaged in some firefights in the Strait of Hormuz, while Tehran would have attacked the United Arab Emirates again. An increase in violence which distances the prospects of a rapid resolution of the conflict, hopes fueled by the latest diplomatic progress between the USA and Iran.
The decline in the spread stops
The substantial stagnation of the spread between Italian 10-year benchmark BTPs and their German equivalents was determined by an increase in yields. Italian government bonds returned to approaching 3.80%, stabilizing at the opening at 3.76%. Bunds, however, have returned above the psychological threshold of 3%.
However, this is a positive result for the spread, which records drops of almost 30% on an annual basis and 16% on a monthly basis, with substantial stagnation over the last 6 months. The only period in which there is an increase in the differential is the one comparing current data with those of January. In this case the increase is 16%.
Yields rising across Europe
The growth in yields was also shared by the rest of the continent, with European government bonds effectively traveling in parallel. The Spanish Bonos confirm themselves to be the ones best able to get closer to the Bunds, among the securities of the large countries, with a spread of 43 basis points determined by a yield of 3.44%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.01% | – |
| Italian BTPs | 3.76% | 75 |
| French Oats | 3.64% | 63 |
| Spanish bonos | 3.44% | 43 |
French OATs, on the other hand, maintain a sp similar to that of Italian BTPs, 63 basis points, generated by a yield of 3.64%.
The May auctions of government bonds
The good results of the spread, with yields rising but still contained compared to previous weeks, give the Treasury hope for the next BTP and BOT auctions. The latest issues in April were characterized by lower demand than usual, although more than sufficient to cover the entirety of the value made available to the markets.
The dates to mark on the calendar for the next few weeks, for those who want to invest in Italian public debt, are:
- May 12th, Bot auction;
- 13 May, auction of medium-long term BTPs;
- 26 May, Short Term BTP auction;
- May 27, Bot auction;
- May 28, auction of medium-long term BTPs.
