Btp-Bund spread at 83 basis points, yields at 4.11% for the benchmarks

The first hours of the week were characterized by the stability of the spread between Italian BTPs and German Bunds, which remained at 83 basis points. However, the average yields of the benchmark 10-year BTPs continue to grow, reaching 4.11%, one of the highest peaks in recent years.

This is a figure in line with the results of the auctions of medium and long-term securities, where the 10-year BTPs recorded a yield of 4.10%, despite the more than acceptable coverage ratio, which demonstrated significant interest from investors.

Spread stable, but the rise in yields continues

For the third consecutive opening, the spread between Italian and German government bonds did not move. The spread remained at 83 basis points, one of the highest levels in recent months. This stability is explained by the stalemate of all the factors that determine the variations in the spread, from internal politics, which has yet to fully resume from the summer break, to international instability, with the war in the Middle East not making significant progress.

What is happening to Italian government bond yields

However, the yields on Italian government bonds are not stable. In fact, on the morning of Monday 31 August they began to grow again, reaching 4.11%. This is one of the highest results in recent years: 10-year benchmark BTPs have not reached a similar average interest rate since December 2023.

Investors are concerned by a number of factors that are putting pressure on Italian public debt:

• the Government seems intent on running a deficit, albeit with instruments granted by the EU, and this will aggravate the public debt;
• the ECB is about to increase interest rates again at its monetary policy meeting in September;
• the Italian economy remains weak, especially with regards to growth, now that the effect of the Pnrr has ended.

The auctions had anticipated the opening

A first sign of this increase in yields arrived on Friday 28 August, when the auctions of medium and long-term government bonds ended and the Treasury made the results public. If the 5-year BTPs and the CCTEU had maintained yields below 3.50%, the 10-year BTPs had anticipated what would happen at the opening on Monday.

The yields of these securities had in fact reached 4.10%, despite very strong demand, with a coverage ratio of 1.62. For the Treasury, this is not entirely positive news. Such high yields increase the cost of debt and reduce the resources available for the Budget for 2027.

The crisis in France does not end

The other most important European countries are also suffering from conditions of pressure on public debts and uncertainty at an international level. Spain keeps its Bonos at 45 points from Bunds, with growing yields.

However, it is France that is experiencing the greatest difficulties, with a continuously growing spread that has reached 86 basis points. The country could replace Italy as the one with the public debt that raises the most concerns in Europe.