At the opening of the financial markets on 4 June, the spread between Italian BTPs and German Bunds reached 75 basis points. A slight increase compared to the previous day, but consistent with the overall stable trend of recent weeks. However, yields increased, reaching 3.77%.
European stocks are running roughly parallel at this stage. Tensions in the Middle East continue to be the main reason for changes in government bonds and affect all major European economies in a similar way.
Spread at 75 points, yields increase
Another slight increase in the spread, which after reaching 74 basis points at the opening on Wednesday 3 June, rose to 75 at the opening on 4 June, recording another increase within 24 hours. The trend continues to be that of last week, with a certain stability of the differential especially compared to the recent past, but the difference lies in the yields.
Coupons on European government bonds are rising. The Bunds rose to 3.02% while the BTPs reached 3.77%, returning closer to 3.80%. This is a precise indication of the exposure of the entire European bloc to the Middle Eastern crisis. Attacks in the Gulf have resumed in recent days, with a serious Iranian bombing of Kuwait’s international airport.
All European economies are similarly affected by these tensions, albeit for different reasons. Germany has a system that is too exposed to gas and therefore suffers from fossil fuel prices more than others. France has developed a very large debt in recent years, which weakens the state’s ability to intervene. Spain is politically unstable, with the Sanchez government supported by a shaky majority. Italy combines high debt and gas exposure with a stagnant economy.
The other European spreads
The other main European countries also showed a slight increase in the spread of their government bonds compared to German ones. Spanish Bonos reached a yield of 3.45%, with a spread of 43 basis points. French Oats reached 64 basis points, with yields of 3.66%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.02% | – |
| Italian BTPs | 3.77% | 75 |
| French Oats | 3.66% | 64 |
| Spanish bonos | 3.45% | 43 |
Yields could also rise further if the European Central Bank were to decide to raise rates, as some “hawks” on the governing council have already called for. The decision should arrive on June 11th.
June government bond auctions
To take advantage of these high yields there will be two distinct opportunities in June. On the one hand, institutional investors will be able to participate in traditional auctions, which will be held:
- Wednesday 10 June, Bot auction;
- Thursday 11 June, medium-long term auction;
- Wednesday 24 June, auction of Short Term BTPs and BTP€i
- Thursday 25 June, Bot auction;
- Friday 26 June, medium-long term auction.
On the other hand, savers will be able to access the new BTP Italia Sì, the bonds indexed to inflation, between 15 and 19 June.
