Btp-Bund spread at 80 basis points, yields growing at 4%

The opening of the financial markets led to an increase in the spread between Italian BTPs and German Bunds, which returned to exceeding 80 basis points by a few decimal points. There was also a general growth in European government bond yields, with German ones reaching 3.20%.

US President Trump’s statements, which claims that the United States has control of the entire Strait of Hormuz, have not reassured investors. On the contrary, Trump’s request for compensation from Iran has agitated the markets, which see the stalemate over the conflict continuing.

The opening of the spread between BTP and Bund on August 11th

After a few days of calm, the spread between Italian BTPs and German Bunds has started to increase again. It was enough for Trump to abandon his “low profile” on Iran and return to claiming that he had full control of the Strait of Hormuz to increase the spread and yields.

Spread increasing to 80 basis points

This is how, after days, the spread returned above 80 basis points, a threshold which for some time has represented the difference between a situation of calm on the markets and one of agitation, often caused by the evolution of the situation in the Middle East.

Yields over 4%

However, yields also increased, reaching 4% for the benchmark 10-year BTP after several days of limited interest. An increase which, for investors, has an interesting timing, given that the BOT and BTP auctions will begin again from tomorrow, whose returns will inevitably be influenced by the same dynamics that are pushing the benchmarks up.

August government bond auctions begin

The BOT auction will be held tomorrow, the first of August, with 8 billion euros in securities maturing in 12 months. The auction of medium and long-term securities, which should have been held on 13 August, was instead canceled “in consideration of cash needs”. It is not uncommon for auctions to be shorter than expected in the summer.

In August, the updated auction calendar therefore reads:

• August 12, Bot auction;
• August 27, Bot auction;
• August 28, auction of medium and long-term bonds.

In fact, the August 26 auction of Short Term BTPs and BTP€i was also cancelled.

Spreads in the rest of Europe

Yields and spreads also increased in a relatively similar manner in the other large European countries. In Spain, the Bonos reached interest of 3.64%, with a spread of 44 basis points.

French OATs, however, maintained yields and spreads very similar to those of Italian BTPs. A Paris benchmark stock yields 4.01%, with a spread of 81 basis points.

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