The spread between Italian BTPs and German Bunds dropped dramatically in the early hours of July 13, thanks above all to an increase in yields on Berlin government bonds. Instability in the Middle East is keeping interest in European stocks high, with France and Spain above recent averages.
An unstable situation which was also reflected in the first auctions in July. The yields of BOTs and especially medium and long-term BTPs were relatively high, with weak demand for the former but still strong for the latter. The Treasury has placed all 15.5 billion euros expected.
Spreads falling but yields rising
Yields on all major European government bonds are rising, including German BTPs and Bunds. Italian stocks gained two hundredths of a percentage point compared to Friday’s opening, reaching 3.83%. However, Berlin bonds saw their interest increase more significantly, by five cents, reaching 3.08% and consequently reducing the spread.
The differential in fact went from 78 to 75 basis points, thus returning to the range in which the spread had stabilized last week, before the rekindling of the war in the Middle East pushed it up to 80 points, one of the highest levels in recent months, exceeded only in the most acute phase of the conflict.
Spanish yields rise, the French anomaly returns
The growth in government bond yields characterized all European countries at the opening on 13 July. Spanish Bonos followed a similar trajectory to that of BTPs, with an increase in interest by three points and a reduction in the spread by two.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.08% | – |
| Italian BTPs | 3.83% | 75 |
| French Oats | 3.78% | 70 |
| Spanish bonos | 3.51% | 43 |
The French situation, however, is anomalous. On Friday the Oats had recorded a peak in out-of-scale yields, at 3.92%, with a spread of as much as 89 basis points. Anomaly partially resolved on the morning of Monday 13th, when Paris securities brought the spread back to 70 points and interest to 3.78%.
The results of the first auctions in July
The first two auctions of July concluded on Friday 10 July, bringing approximately 15.5 billion euros into state coffers. The first was that of the BOTs, which achieved returns close to 2.9%. The other auction included three medium- and long-term products:
- a 3-year BTP, with gross yields of 2.98%;
- a 7-year BTP, with a gross yield of 3.50%;
- a 15-year BTP, with a gross yield of 4.23%.
The next auctions will be held at the end of the month:
- 28 July auction of Short Term BTPs and BTP€i;
- July 29th Bot auction;
- July 30 auction of medium and long-term bonds.
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