The spread between Italian BTPs and German Bunds remained stable between the opening of 6 and 7 August, concluding a week of declines and rebounds with a day of stability. However, this does not mean that yields have remained stagnant: interest on Italian ten-year bonds has in fact increased.
It is the instability in the Middle East that is driving uncertainty over European public debts. Not even Germany is anymore immune to this phenomenon: the times in which German Bunds were considered a safe haven asset capable of protecting investments in moments of greatest economic instability seem to have passed.
Btp-Bund spread stable, yields increasing
The stability of the spread between BTPs and Bunds is news. In the last week the spread went from record figures to a sudden collapse to mid-July levels. Everything depends on the war in the Middle East, in a very inverse phase, the result of the vagueness of the negotiations and the never stable position of Trump’s United States.
The uncertainty didn’t resolve between July 6 and 7, but it didn’t get worse either. A stalemate phase that also left investors waiting and therefore kept the spread at 78 basis points. The same cannot be said, however, for returns.
Further growth in yields
Interest on BTPs, and on all other European securities as we will see, have in fact returned to the levels of the beginning of the week, but this time also accompanied by Bunds. This explains why, with benchmark ten-year BTP yields at 3.93%, the spread remained well below 80 basis points.
German securities, in fact, rose to 3.15%, which allowed the differential not to grow. Concerns about the European economy remain, despite the positive data from the PMI indices.
European stocks follow the Italian trail
The performance of the rest of the securities of the major European countries follows, as anticipated, that of the BTPs. Spanish bonds reached a spread of 44 points, essentially stable, with yields of 3.59%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.15% | – |
| Italian BTPs | 3.93% | 78 |
| French Oats | 3.95% | 80 |
| Spanish bonos | 3.59% | 44 |
The French Oat instead remained firm at 80 basis points, with interest of 3.95%. Pargi’s titles continue to resemble, in terms of trend, more and more those of Italy.
Auctions of Italian government bonds
The details of the Bots auction, the first in August, which will be held next week, should be announced today. With yields still so high, results similar to those of the last ones in July are expected, when supply greatly exceeded demand, thanks to the convenience of Italian government bonds.
The dates to remember for the month of August are:
- August 12, Bot auction;
- 13 August, auction of medium and long-term bonds;
- 26 August, auction of Short Term BTPs and BTP€i;
- August 27, Bot auction;
- August 28, auction of medium and long-term bonds.
