Slight decline in the spread between the benchmark 10-year BTPs and their German equivalents, the Bund. The spread remained at 77 basis points at the opening on June 10, with yields of 3.82% for Italian bonds. The 12-month BOT auction will be held today, the first in June, followed by another issue tomorrow, 11 June.
The latter should have been the issuance of medium and long-term securities, with different products with a duration ranging from 3 to 30 years. However, the Treasury has decided to drastically reduce the number of products at auction, leaving only 3-year BTPs, and to syndicate the issuance of 7- and 30-year BTPs in the near future.
Spread at 77 points between BTPs and Bunds
The opening of the bond markets on 10 June did not follow yesterday’s trend regarding the differential between BTPs and Bunds. No new increase, with the spread stable at 77 basis points with yields effectively unchanged at those of the previous closing: 3.82% for BTPs, 3.05% for Bunds.
A result achieved despite the situation in the Middle East, which for months has dictated the trend in government bond yields, having reached a new critical point. The United States has resumed attacking Iran after the shooting down of a US helicopter over the Strait of Hormuz.
However, the implications of the conflict no longer seem capable of substantially modifying the trend of the spread. The markets have settled to the current situation and only a real unblocking of traffic in Hormuz could generate strong movements.
Europe awaits the ECB’s decision
Tomorrow the European Central Bank will communicate its monetary policy decision for June. Analysts expect an increase of 0.25% in interest rates, which should then reach 2.25%. A decision that should be taken to combat inflation, reaches 3.2%. An undesirable effect of this policy will be the slowdown of the economy, in a situation in which EU GDP has already fallen by 0.2% in the first quarter.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.05% | – |
| Italian BTPs | 3.82% | 77 |
| French Oats | 3.71% | 66 |
| Spanish Bonos | 3.49% | 44 |
The wait for this decision contributed to the stability of the spread also in the rest of the European countries. In Spain the spread between Bonos and Bunds remained at 44 basis points, just as the spread between German bonds and French Oats remained at 66 points.
Today the BOT auction, tomorrow the 3-year BTP auction: the yields
The auction for 12-month Bots will be held today. The characteristics of these government bonds are:
- ISIN code IT0005716714;
- duration 367 days (12 months);
- minimum amount offered 8.5 billion euros.
The returns will be defined by the price difference between the nominal value and the sales value. The auction for 3-year BTPs will be held tomorrow. Many other securities should have ended up at auction but every issue of BTPs and CCTEUs over 3 years was cancelled. In its place, a syndicated issue of 7 and 30 year BTPs will be held in the near future. The other auctions in June will be held:
- Wednesday 24 June, auction of Short Term BTPs and BTP€i;
- Thursday 25 June, Bot auction;
- Friday 26 June, medium-long term auction.
