In the first minutes after the opening of the European financial markets on 23 July, the spread between Italian BTPs and German Bunds recorded another increase compared to yesterday, reaching 85 basis points. This is yet another record for the last few months and among the highest peaks ever for 2026.
This race is caused by the constant increase in the yields of Italian government bonds, which continue to grow. The opening saw the benchmark 10-year BTPs reach 4.04%, a level of interest not seen for over two years.
High spread and record returns, the Middle East scares Europe
Such an uncertain opening of the government bond markets is determined above all by a night full of news from the Middle East. The United States has once again attacked Iran extensively, but investors’ attention is shifting to the Red Sea.
The Houthis apparently attacked two Saudi oil tankers passing through the Bab-el-Mandeb Strait, resuming the blockade of the passage between the Red Sea and the Indian Ocean. A situation that could extend the war, raise fuel and gas prices and damage the European economy.
Spread at 85 basis points
The first effect of this instability is a spread 10 points above the recent average, at 85 basis points, a level not seen since March. The differential is attenuated only by an increase in German yields, which chase Italian ones, preventing it from widening further.
However, medium-term data highlights the problems. Since the beginning of 2026, the spread has grown by 30% and has substantially returned to the levels of a year ago, nullifying 12 months of rapprochement of Italian yields with German ones.
Record returns for two years
If we exclude a very brief peak last April, which immediately subsided, yields on Italian government bonds have not consistently exceeded 4% for two years. The 4.04% opening on 23 July is an anomaly, a level that was seen before the Government implemented the rigid reductions in public spending seen in the last two budget measures.
The crisis in the Middle East is effectively canceling out the effect of this work on public accounts that Meloni and Giorgetti dealt with, resisting pressure from their respective parties for years.
European spreads stable
However, the spreads of the main European countries manage to remain stable, albeit with high yields. In Spain there was growth of one basis point, which brought the spread to 47 points, still below recent peaks, and yields to 3.66%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.19% | – |
| Italian BTPs | 4.04% | 85 |
| French Oats | 3.99% | 80 |
| Spanish Bonos | 3.66% | 47 |
The French Oats, on the other hand, remain completely unchanged, remaining one cent below the 4% yield and exactly 80 basis points from the Bunds.
The next auctions of Italian securities
Today the Treasury is expected to communicate the details of the next auction of government bonds, that of Short Term BTPs and BTP€i. The communication on Bots will follow tomorrow. The auctions will be held:
- auction of Short Term BTPs and BTP€i on 28 July;
- Bot auction on July 29th;
- auction of medium and long-term bonds on 30 July.
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