The spread drops again at the opening of July 10th. After two days at 80 basis points, the spread between BTPs and Bunds was reduced to 78 points thanks to a faster decline in the yields of Italian bonds than those of German ones.
The 12-month BOT auction also ended yesterday, with results in line with those of the last similar issue, held a month ago. The coverage ratio for these government bonds continues to be low, under 1.5, and as a result the yields are close to 2.7% even without a fixed coupon.
The spread drops again after two days to 80 points
The decline in the spread in the last opening of the week is an important data for Italian government bonds. In the last two days the differential had remained a few tenths above 80 points, marking some of the highest peaks in recent months. Reducing the spread was essential to avoid risking an increase in yields during the auctions.
And the yields responded positively in the morning. The benchmark 10-year BTPs recorded interest rates of 3.81%, five hundredths of a point below yesterday’s opening and almost a tenth below the peak of 3.90% recorded during the day. German Bunds also limited yields, at a slower pace than their Italian counterparts, reaching 3.03%.
Spread peak in France: how European government bonds are doing
France saw a spike in its government bond yields. The 10-year Oat reached interest rates of 3.92%, a sharp increase compared to July 9 and among the highest figures in months. As a result, the spread rose to 89 basis points, exceeding the Italian figure for the first time in some time.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.03% | – |
| Italian BTPs | 3.81% | 78 |
| French Oats | 3.92% | 89 |
| Spanish bonos | 3.48% | 45 |
In Spain, however, the Bonos reduced the spread, moving to 46 basis points of spread, with yields of 3.48%.
How the Bot auction went
The BOT auction ended yesterday, with 8 billion euros of 12-month bonds placed on the market. It was the maximum offered by the Treasury, but the coverage ratio was slightly lower than ideal, at 1.45. As a result, yields stabilized at a relatively high level, around 2.96%.
Auctions of medium and long-term government bonds will be held today. These are three BTPs with 3, 7 and 15 years respectively, with yields between 3 and 4%. Issues will then resume at the end of the month, on three different occasions:
- 28 July auction of Short Term BTPs and BTP€i;
- July 29th Bot auction;
- July 30 auction of medium and long-term bonds.
