The spread between Italian BTPs and German Bunds fell by 4 basis points at the start of September 25, reaching 92 basis points, still high compared to the recent past but clearly reduced from the peak reached yesterday. However, yields remained stable at 4.50%.
Regular auctions of Italian government bonds begin today, after the syndicated issue of the BTP Green which received bids for 110 billion euros.
The spread falls, but it is “thanks to” the Bunds
The decline in the spread was almost entirely due to an increase in German government bond yields. Bunds gained three hundredths of a percentage point. Italian yields recorded a very slight decline, however remaining above the 4.50% threshold. The result was the reduction of the spread to 92 basis points, still above the recent average.
Pressure on government bonds continues
However, the international situation that led to these returns has not changed. The factors that lead the markets to demand greater interest in BTPs and Bunds have remained the same:
- international tensions in the Middle East and Ukraine;
- high oil prices;
- the growth of inflation in Europe and the USA;
- high yields on US government bonds.
However, the markets did not react negatively to the ISTAT data which confirmed Italy’s continued existence in the excessive deficit procedure. At the same time, however, the better-than-expected OECD growth data do not seem to have particularly helped.
How are the spreads going in Europe
The other government bonds of the large European countries also recovered on the Bunds. The Spanish Bonos have returned to 47 basis points, at the levels that have characterized them for months now.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.58% | – |
| Italian BTPs | 4.50% | 92 |
| French Oats | 4.65% | 107 |
| Spanish bonos | 4.05% | 47 |
Big deviation for the French Oat, which went from 112 points spread to 107. The situation in Paris, however, remains unstable, between a deficit that is increasingly close to slipping out of the control of the French Government and the presidential elections that are approaching.
Government bond auctions begin today
Today the Treasury will hold the BOT auction. 7.5 billion euros of six-month bonds will be offered. The BTP auction will be held on 29 September, with two products:
- A 5-year BTP with a coupon of 3.95%;
- A 10-year BTP with a 4% coupon.
In total, this is 6.5 billion euros in multi-year Treasury bonds. In recent days, however, the syndicated issue of Green BTPs was concluded.
