The spread between Italian BTPs and German Bunds fell to 72 basis points in the morning of June 15th. It is the result of the agreement between Iran and the US to open nuclear negotiations and stop all hostilities for 60 days, which also includes an opening of the Strait of Hormuz by Friday the 19th.
The Treasury will also begin issuing Btp Italia Sì today, a new government bond indexed to inflation. It will be reserved for retail investors, therefore private individuals, like other similar products issued in recent years.
The spread fell to a two-week low
In the first minutes of the morning of June 15th, the spread between BTPs and Bunds fell to 72 points, a level it had not reached for two weeks. Yields fell, reaching 3.68% for Italian government bonds and falling below the 3% threshold for German ones. This is the effect of the agreement between Iran and the USA for the opening of nuclear negotiations, accompanied by a 60-day ceasefire and the reopening of the Strait of Hormuz, which should be signed by Friday.
In the past, such significant news would have shifted the balance of the bond markets much more. Recently, however, government bond yields have suddenly stopped reacting to the various news of rapprochement and estrangement between Iran and the US over the war in the Middle East.
It is a question of trust, there have now been half a dozen announcements of agreement since the beginning of the conflict, but also an economic one. Investor uncertainty concerns the energy crisis, and many observers agree that even with the Strait of Hormuz open, oil will take months to return to pre-war price levels.
Moderate reaction also in the rest of Europe
The government bonds of other large European countries also reacted moderately to the news of the opening of the Strait of Hormuz by the end of the week. Spanish Bonos, the closest to Bunds for months now, recorded a spread of 42 basis points, with yields below 3.40%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 2.96% | – |
| Italian BTPs | 3.68% | 72 |
| French Oats | 3.59% | 63 |
| Spanish Bonos | 3.38% | 42 |
Similarly, the French Oat reduced their spread, bringing it to 62 basis points, with yields falling just below 3.60%.
The issuance of Italian BTPs is underway.
Starting from today 15th June until the 19th, the Treasury will issue Btp Italia Sì, the new government bonds indexed to inflation and dedicated to retail investors. The most realistic scenario for the returns of these products is around 4%, given by various components, such as:
- the minimum real rate of 1.60% per annum;
- average inflation of 2.3%-2.6% according to current estimates;
- the final loyalty bonus of 0.6%.
In addition to this issue, the other June auctions will also be held in the coming weeks:
- Wednesday 24 June, auction of Short Term BTPs and BTP€i;
- Thursday 25 June, Bot auction;
- Friday 26 June, medium-long term auction.
